BSP rate cut on Dec. 11 likely but ‘not assured’
The Philippines’ darkening growth outlook, shaken by a corruption scandal that has sapped business and consumer confidence, has increased the chances of another interest rate cut before year’s end, Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said.
But with fresh data due ahead of the Monetary Board’s Dec. 11 meeting—including November inflation figures—Remolona struck a measured tone, saying that while an easing move next week may happen, it is “not assured.”
“I think we all agree that for 2025, growth will be slow,” he told reporters.
“We think maybe [growth will be] between 4 percent and 5 percent. But the recovery should start by 2026, maybe the middle of 2026. And then we should be back on track by 2027,” he added.
After the economy had expanded by just 4 percent in the third quarter—its slowest pace in over four years—President Marcos’ economic team acknowledged that the official macroeconomic targets may need adjustment to reflect the challenging realities created by the antigraft crackdown.
The widening probe has implicated lawmakers, members of the Cabinet, government engineers and some private contractors.
Last week, the Bureau of the Treasury reported that public expenditures had contracted by nearly 8 percent in October while revenues sagged by 6.6 percent as the sweeping cleanup delayed infrastructure projects.
The negative impact may have also spilled over to consumer spending, which historically drives about 70 percent of total output. Despite tame inflation and lower borrowing costs that could have bolstered household purchasing power, private consumption grew only 4.1 percent in the third quarter, a four-year low.
The BSP, for its part, is seen to have enough policy room to cut rates next week.
1.6% Nov inflation seen
According to a median estimate from 10 economists polled by the Inquirer last week, the consumer price index may have risen 1.6 percent in November. If that forecast holds, the reading, to be released by the Philippine Statistics Authority on Dec. 5, would settle below the 2- to 4-percent target range of the central bank.
Since August last year, the central bank has cut the key rate that banks use as a guide when pricing loans by 175 basis points (bp) to 4.75 percent.
While more cuts may be on the horizon, Remolona previously ruled out the possibility of outsized reductions that could surprise the market.
In a note to clients, analysts at the Japanese investment bank Nomura said they expect the BSP to lower its policy rate by an additional 75 bps in this cycle, bringing it down to 4 percent. They forecast a 25-bp cut at the central bank’s December meeting, followed by two more reductions of the same size in February and April 2026.
“The BSP has already taken a more preemptive approach against emerging downside risks to the growth outlook from the corruption controversy,” they said.
“In addition, a necessary condition for additional BSP cuts is inflation remaining within the BSP’s 2 to 4 percent target, which we expect to be the case,” they added.
