BSP signals monetary easing cycle to end soon
As inflation moved back to the target range, the Bangko Sentral ng Pilipinas (BSP) hinted that growth-supporting interest rate cuts were drawing to a close, leaving room for further easing only if conditions warrant.
The central bank said its policymaking Monetary Board would assess the latest economic data at its first rate-setting meeting of 2026 on Feb. 19. This was while noting that the outlook for the domestic economy “has weakened further.”
Consumer price increases quickened to 2 percent in January—ending 10 consecutive months of readings below the official 2 percent to 4 percent target band—alongside last year’s lackluster economic growth.
Still, the BSP made clear that its easing cycle was approaching its conclusion, saying any further reductions in borrowing costs would be “limited and guided by incoming data.”
“The Monetary Board noted that the outlook for domestic economic activity has weakened further,” the BSP said. “Business sentiment has continued to decline on governance concerns and uncertainty over global trade policy.”
“Nevertheless, domestic demand is expected to rebound gradually as the effects of monetary policy easing work their way through the economy and public spending improves.”
Since beginning its easing cycle in August 2024, the BSP has lowered the benchmark policy rate, guiding bank lending costs by a total of 2 percentage points to 4.5 percent.
Last week, BSP Governor Eli Remolona Jr. said the central bank was ready to act if it could help spur demand. This was after the disappointing fourth-quarter economic growth rate of just 3 percent.
The weak outturn pulled average growth for 2025 to 4.4 percent, below the government’s 5.5 percent to 6.5 percent target. Officials and analysts attributed the slowdown to a mix of climate-related disruptions and the Marcos administration’s sweeping anticorruption drive, which curbed government spending and weighed on business and consumer confidence.
Aris Dacanay, an economist at HSBC Global Investment Research, still expects one quarter-point rate cut—to 4.25 percent—even as faster inflation last month “has made the path to further rate cuts rougher.”
“Cognizant of this risk, we still think the BSP will likely cut its policy rate in February, since we expect growth concerns to outweigh inflation when deliberating monetary policy,” he said.
