More BSP rate cuts likely until 2026

With Philippine economic growth losing steam and inflation still well below the target range, the Bangko Sentral ng Pilipinas (BSP) is likely to deliver more rate cuts through 2026, according to a unit of Fitch Solutions.

BMI, the research unit of Fitch Solutions, said in a report that the BSP is likely to trim its policy rate to 4.5 percent by the end of the year, following its Oct. 9 decision to cut the benchmark interest rate to 4.75 percent.

The latest reduction marked the BSP’s fourth consecutive rate cut this year.

“We expect the Bangko Sentral ng Pilipinas (BSP) to maintain a pro-growth policy stance amid growing economic uncertainty,” BMI said.

“The central bank has ample room to ease as inflationary concerns subside. The latest headline inflation in September came in at 1.7 percent, marking the seventh consecutive month below BSP’s 2.0–4.0 percent target range,” the research group added.

The BSP on Oct. 30 also said that inflation for the month may have settled within the range of 1.4 percent to 2.2 percent.

BMI is projecting average inflation to settle at 1.6 percent by the end of 2025.

Inflation averaged 1.7 percent from January to September, according to BSP data.

Further easing is expected in 2026, with BMI expecting the rate to end at 4 percent by year-end, as inflation rises due to possible electricity hikes and higher rice import tariffs.

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“As such, we forecast a higher average inflation of 3.5 percent for 2026, which remains within BSP’s target range. We also forecast GDP growth to slow to 5.2 percent in 2026, well short of the government’s 6-7 percent target. This will contain inflation, providing BSP the policy room to continue the easing cycle to stimulate the economy,” BMI said.

Meanwhile, the Philippine peso is likely to weaken gradually toward 59 per US dollar by the end of the year, averaging around 58 for the whole of 2025.

The Philippine peso recently tumbled to a historic low after closing at 59.13 against the US dollar last Oct. 29, which the BSP said may have been partly due to the controversy over infrastructure-related corruption.

Despite this, BMI said the BSP remains well-positioned to manage the peso’s depreciation, supported by gross international reserves of $108.8 billion as of September.