BSP rate cut urgency builds amid anemic economy
The Bangko Sentral ng Pilipinas (BSP) is widely expected to cut interest rates again later this week, taking advantage of low inflation to support an economy still reeling from a high-profile corruption scandal.
Economists at Nomura Global Markets Research see a 65-percent chance that the central bank’s Monetary Board will reduce its key policy rate by a quarter point to 4.25 percent at its Feb. 19 meeting.
Nomura assigned a 35-percent probability that the board would hold rates steady to see how previous cuts play out in the broader economy.
“The inflation outlook also remains benign, which will allow BSP to focus on supporting economic activity amid a severe fiscal contraction due to the corruption scandal,” the Japanese investment bank said in a note to clients.
“We expect the BSP’s Monetary Board meeting to be similar to the one in December, when it turned less dovish and emphasized that the end of its easing cycle is near, after the substantial rate cuts delivered so far,” it added.
All 13 economists polled by the Inquirer last week held the same view, citing the need to bolster domestic growth momentum following disruptions linked to an expansive anticorruption crackdown.
If realized, another cut will bring cumulative reductions since the easing cycle began in August 2024 to 2.25 percentage points.
Weak growth
The assessment followed data showing that gross domestic product had expanded by just 3 percent in the fourth quarter of 2025—the slowest pace in more than 14 years outside the pandemic—and well below market estimates.
The weak outturn dragged the average growth in 2025 to 4.4 percent, missing the government’s 5.5-percent to 6.5-percent target.
Meanwhile, consumer prices rose 2 percent in January from a year earlier, ending 10 consecutive months of readings below the central bank’s 2 to 4 percent target range.
BSP Governor Eli Remolona Jr. has said he would only worry if inflation settles above 3 percent.
Throughout the ongoing campaign to support growth, the Monetary Board paused only once, holding rates steady at its Feb. 13 meeting last year.
Given that interest rate cuts typically work with a lag, Nicholas Antonio Mapa, chief economist at Metrobank, said it would make sense to deploy support sooner rather than later, and while inflation remained target-consistent.
“A tired consumer [segment], alongside the lack of private sector investment, has been weighing on growth ever since the COVID reopening,” Mapa said in a commentary. “Both could use the shot in the arm provided by the air cover of a BSP cut.”
