BMI, a unit of Fitch Solutions, and stock brokerage Unicapital Securities Inc. expect the Bangko Sentral ng Pilipinas (BSP) to continue cutting interest rates in the second half of 2025 amid easing inflation.
BMI said in a report the low inflation and slow growth in the first half would likely prompt the BSP to cut rates by 50 basis points in the second half of 2025, bringing the benchmark policy rate to 4.75 percent by year-end.
The Fitch Solutions company said the BSP has ample room to further ease its policy rates due to the softening of domestic activity and the winding down of exports front-loading.
The BSP is expected to maintain a pro-growth policy stance in the second half of the year amid growing economic uncertainty, it said.
Gross domestic product (GDP) growth in the Philippines slowed down to 5.4 percent in the first quarter, while slightly picking up to 5.5 percent in the second quarter.
Meanwhile, inflation further eased to 0.9 percent in July 2025 from its average inflation rate of 1.8 percent in the first half of the year.
BMI expects inflation to settle at an average of 1.6 percent by the end of the year, a revision from its earlier projection of 2.2 percent.
“Despite rate cuts by the BSP, the peso will strengthen slightly from current levels as the evolving situation in the US weighs on the dollar,” it said.
The US Federal Reserve is also projected to further cut rates by 50 bps in the second half of 2025. BMI said this would keep interest rate differentials largely stable between the US and the Philippines.
“We continue to expect the peso to trade in a range of P55.20 to P59.20/USD through H2 2025,” it said.
The currency is forecasted to end on a stronger note this year than its current rate of P57.22/USD as the risk of weakening investor confidence in the US dollar remains.
Unicapital also said that with inflation softening, it expects further easing of key policy rates through potential BSP rate cuts in the remaining months of the year.
The BSP Monetary Board has already lowered key policy rates by 50 basis points to 5.25 percent.
Unicapital anticipates another 25 to 50-basis-point rate cut in August and October, which could bring key interest rates down to 4.75 percent to 5.00 percent by year-end.
