BSP to continue cutting rates in 2025, says BofA

The Bangko Sentral ng Pilipinas is expected to continue reducing its benchmark interest rate in the remainder of this year, in tune with most other central banks in Southeast Asia.

This is according to Bank of America (BofA) Global Research, which said in a note that the region is entering the second semester of 2025 “with lesser downside risks.”

The research team of the BofA Securities said the growth outlook for Southeast Asia has improved, despite ongoing trade-related uncertainty.

Thus, they raised the growth forecast for Vietnam, Malaysia, Singapore and Indonesia.

“On the other hand, we maintain growth forecasts for the Philippines, which is better shielded from US tariff impact, and is largely tracking domestic developments,” they added.

They said the Philippines economy was largely domestic-oriented. Also, US President Donald Trump’s proposed reciprocal tariff on the Philippines is relatively lower at 17 percent compared to that for neighboring countries.

That means this unit of the BofA group continues to expect the Philippine economy to grow by 5.5 percent in 2025. It also maintained its forecast for 2026 at 5.6 percent.

Further, BofA Global Research said central banks in the region remain inclined toward policy easing. This, as external uncertainties prevail while inflation pressures are contained.

“We expect inflation across the region to remain well within central banks’ target ranges or comfort thresholds over the forecast horizon,” the group said.

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“Across-the-board, the lack of strong domestic demand pressures should keep a lid on underlying inflation,” it added. “Food price pressures should also remain contained in the absence of extreme weather patterns.”

In its latest policy meeting held last June 19, the BSP’s Monetary Board again reduced its target reverse repurchase rate by 25 basis points to 5.25 percent.

The BSP said this was done “as the outlook for inflation moderated.”

Also, the BSP said the inflation forecast for 2025 fell from 2.4 percent to 1.6 percent and that “inflation expectations remained well anchored.”