BSP seen to cut rates again in June amid anemic growth
The Bangko Sentral ng Pilipinas may deliver another interest rate cut in June to support the anemic economy, which likely remained weak in the first quarter as an unresolved corruption scandal chilled government spending and eroded confidence.
In a note to clients, Deutsche Bank said the first-quarter growth figures could strengthen the case for another quarter-point rate cut when the central bank’s policy-setting Monetary Board meets in June.
The outlook also suggests officials may opt to keep the benchmark rate steady at 4.25 percent when they convene on April 23, giving the central bank time to assess evolving inflation dynamics and incoming economic data.
Even so, the German banking giant said subdued price pressures would give the central bank enough room to lower borrowing costs further to support the sluggish economy without risking a renewed flare-up in inflation.
“We still expect another 25-basis point rate cut by BSP’s June meeting, as first quarter gross domestic product growth data (to be released early-May) is likely to remain weak,” Deutsche Bank said.
Supply woes temporary
“Although BSP raised its inflation forecast … it noted that it was ‘due mainly to supply-side pressures, which are likely to be temporary,’” it added.
At its first policy meeting of 2026, the Monetary Board last week cut the benchmark interest rate by 0.25 percentage points, bringing it to its lowest in more than three years. The widely expected move brought total reductions since the easing cycle began in August 2024 to 2.25 percentage points.
But the central bank has grown more cautious about its next steps. Governor Eli Remolona Jr. said further monetary easing may do little to lift the sluggish economy at this point, adding that lower borrowing costs must be matched by stronger government spending and credible efforts to curb graft and corruption to gain traction.
Remolona also acknowledged that policymakers had underestimated the economic damage caused by the high-profile graft scandal, which has paralyzed public spending and gutted confidence. From now on, additional easing actions would be “conditional,” he added.
“This supports our view for another rate cut as demand-pull pressures are likely to stay muted in line with subdued confidence and sentiment,” Deutsche Bank said in the same note.
