The Bangko Sentral ng Pilipinas (BSP) is poised to lower its key interest rate on 19 June, with a majority of economists anticipating a 25 basis point reduction to 5.25 per cent, according to a Reuters survey conducted between 10 and 17 June. The expected move reflects a shift in sentiment since April, when most analysts forecast the central bank would hold rates steady.
This anticipated easing comes as inflation in the Philippines slowed sharply to 1.3 per cent in May—its weakest reading in over five years and notably below the BSP’s 2 to 4 per cent target range. The cooling inflationary environment, coupled with underwhelming first-quarter growth despite increased public spending, has strengthened the case for monetary support.
Of the 25 economists polled, 22 expect a 25 basis point cut this week, while three see rates remaining at the current level of 5.50 per cent. Economists suggest the BSP now has policy space to shift its focus toward growth support.
“Progress on the inflation front opens the door for the BSP to consider another rate cut,” said Sarah Tan, economist at Moody’s Analytics. “Further, the recent stabilisation of the peso will provide an additional nudge to the decision-making process. Continued monetary easing would play a vital role in supporting the domestic economy amid a complex external environment.”
Looking ahead, more than half of the 23 economists who shared longer-term projections anticipate a further cut of 25 basis points to 5.00 per cent by the end of the third quarter. The median forecast suggests a cumulative 50 basis points reduction this year, although views diverge beyond that, with no consensus on the policy stance for end-2025.
Governor Eli Remolona had already indicated in April that further cuts were likely, reinforcing expectations for a more accommodative stance. Nonetheless, the policy trajectory may be complicated by external developments, particularly decisions by the US Federal Reserve, which is expected to maintain rates until at least September.
“While downside risks to both growth and inflation suggest more cuts are needed, the Federal Reserve’s path will likely play an equally important role in determining the magnitude of rate cuts by the BSP,” said Shreya Sodhani, regional economist at Barclays. “With our US economists now looking for only one cut by the Federal Reserve this year, we think the BSP can ease only twice more while keeping its desired 100 basis point differential between its policy rate and the Fed funds rate.”
-Reuters
