BSP rate cuts seen to go on in 2026
The Bangko Sentral ng Pilipinas (BSP) might further reduce its key interest rate this year to help shore up a slowing economy that was battered by a sweeping corruption crackdown. Analysts think so, citing subdued inflation that could help the central bank maintain its pro-growth stance.
“The BSP is poised to continue easing policy rates, potentially bringing them closer to 4 percent by the end-2026,” said Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines.
An initial 0.25 percentage-point reduction, Asuncion said, could happen in the first quarter. He said another one may be delivered by the end of 2026 “when environment allows.”
“Further BSP rate cuts will hinge on sustained disinflation and stable inflation expectations. If price pressures remain contained and growth momentum softens, the central bank has room to ease,” he said.
“Global rate cuts and a steady peso would reinforce that path, but volatility or inflation risks could delay adjustments,” he added.
Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., also sees more easing actions this year. Ravelas noted that while the peso’s performance matters for monetary policymakers, the foreign exchange rate is not a priority for the central bank.
“For policy rates, the BSP will keep a cautious stance—maybe one or two cuts in the first half of the year as inflation stays tame,” Ravelas said.
“Inflation and growth risks weigh heavier [and the] BSP’s top priority is price stability, not defending a level,” he said.
President Marcos’ economic team earlier said that official macroeconomic goals might need recalibration as the government presses ahead with an intensifying anticorruption campaign.
To help “offset” the drag from the graft fallout, the BSP cut its benchmark rate by another quarter point to 4.5 percent at the Monetary Board’s Dec. 11 meeting.
That move, which was widely expected among economists, brought the reductions since the easing cycle began in August 2024 to a total of 2 percentage points.
BSP Governor Eli Remolona Jr. had said any additional rate cuts this year—if any—would likely be limited to a single 25-basis-point move, adding that the central bank would steer clear of outsized or off-cycle actions that could unsettle markets. Most recently, Remolona declared that the easing cycle is “nearing its end.”
But economists at the United Kingdom-based Capital Economics believe that there’s scope for a bit more easing this year.
“We expect further rate cuts in Korea, the Philippines, Thailand and Indonesia, but in most countries easing cycles are nearing their end,” they said in a note to clients.
They added that the massive graft scandal here “is continuing to weigh on economic activity.”
John Paolo Rivera, a senior research fellow at state-run Philippine Institute for Development Studies, said the BSP is expected to be cautious and data-dependent.
“While easing is possible if inflation stays within target and growth remains soft, the peso will be an important consideration, not as a target, but as a risk channel,” Rivera said.
“If the peso’s weakness threatens to feed into inflation or destabilize expectations, the BSP is likely to pause. Otherwise, it can afford limited easing as long as price and financial stability are preserved,” he added.
