Another interest rate cut is possible within the year, according to the Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr.
Remolona said in an interview with Bloomberg TV that another rate cut is possible if there are signs of weak demand in the economy.
“I think we’ve reached our sweet spot for inflation, as well as for output growth. If the numbers stay the way they are, then we won’t need another rate cut. But there are signs of weakness, for example, the Purchasing Managers Index, which is a good index in times of uncertainty, that indicates weakness. So if that weakness materializes, then there’s room for one more rate cut,” said Remolona.
“The ‘Goldilocks’ rate can change. It’s roughly, the trend growth rate of the economy, and that could change. So, if there’s signs of weak demand, especially then a rate cut will help,” he said.
The BSP’s Monetary Board has two more rate-setting meetings this year on Oct. 9 and Dec. 11,
The BSP reduced the overnight borrowing rate on Aug. 28, and economists said further easing may be possible in the remaining months of the year.
Gareth Leather, a senior Asia economist at Capital Economics, said that further easing, with at least one more 25-basis-point (bps) cut by the end of the year, is likely given the relatively “dovish” tone of the central bank’s statement.
“The economy could certainly do with more support. Although GDP (gross domestic product) growth held up relatively well in the first half of the year, the economy looks set to slow. Low inflation and falling interest rates will provide some support to demand this year. But with fiscal policy being tightened and exports set to weaken, we expect growth to struggle,” he said.
Leather said the main reason they expect further easing is the persistently weak price pressures, with headline inflation dropping to just 0.9 percent in July driven by falling food and transport prices. Core inflation also remained subdued at 2.2 percent in the same month.
“Our forecast of a further 25bps of cuts for this year makes us more dovish than the consensus,” he said.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), said that further local policy rate cut/s is possible due to the relatively “benign” inflation trend and possible -0.25 bps Fed rate cut in September.
“For the coming months, it is possible for inflation to sustain at 1 percent levels up to September 2025 and 1 percent to 2 percent levels from October to December 2025, or still below the BSP’s inflation target range of 2 percent to 4 percent, that could justify further BSP rate cut/s that would match any future Fed rate cuts from 2025 to 2027,” he said.
Nicholas Mapa, chief economist of Metrobank, said that a potential additional easing is “in the pipeline” should inflation remain stable and inflation expectations stay anchored.
The central bank will remain data dependent as “target consistent inflation over the policy horizon afforded BSP the space to provide settings conducive to growth,” said Mapa.
Global research firm Oxford Economics and US bank Citi also expect another interest rate cut by the Bangko Sentral ng Pilipinas (BSP) in the fourth quarter of 2025, with a similar adjustment possible in the first quarter of 2026.
The BSP said it was committed to bolstering growth amid low inflationary pressures. The country’s gross domestic product (GDP) expanded by 5.5 percent in the second quarter, a slight increase from 5.4 percent in the first quarter, but at the low end of the government’s 2025 growth target of 5.5 percent to 6.5 percent.
“The BSP remains cautious about the risks from the U.S. tariff hikes, which could exert downside risks on trade and domestic investment,” Oxford Economics said in a note. “To achieve the low end of the growth target, growth would have to accelerate to 5.6 percent year-on-year in the second half, emphasizing the necessity for more accommodative monetary policy to support growth.”
Headline inflation eased to 0.9 percent in July from 1.4 percent in June, falling below the BSP’s 2 percent to 4 percent target range and marking its lowest level since November 2019.
“With expected softer commodity prices – we forecast Brent crude to drop to $65 per barrel by year-end – inflationary pressures are low,” Oxford Economics said. “This aligns with the BSP’s projection: BSP now expects the inflation rate to be 1.7 percent for 2025, a slight upward adjustment from 1.6 percent prior. Therefore, with subdued inflation, the central bank can maintain an easing bias.”
Oxford Economics also noted the peso-dollar exchange rate has been volatile and under renewed depreciation pressure since the end of May, depreciating by 2.7 percent against the greenback since then.
“While BSP doesn’t target the exchange rate explicitly, the pass-through effect of a weaker peso on inflation remains a concern. However, given the U.S. Fed is expected to cut its rate in September, earlier than our previous forecast, this should alleviate some downward pressure on the peso,” it said. “We believe BSP will adopt a cautious approach while retaining an easing bias. One more 25bps reduction to 4.75 percent is likely before the year-end.”
Meanwhile, Citi said the BSP’s latest statement was “notably less dovish,” reiterating upside risks to inflation and appearing more confident on growth. The previous guidance on the need for a more accommodative monetary policy stance was omitted.
“For now, we maintain our call of 25 bps each in October 2025 and February 2026 assuming a growth slowdown in the second half of 2025,” the US bank said. “But we now see a significant risk that the October 2025 cut gets pushed back to December 2025, should BSP stay concerned about tariff-related inflation pressures on rice and electricity.”
“On growth, BSP was slightly more confident vs. June—It noted that domestic demand has ‘held firm,’ even as activity could be ‘tempered’ by external headwinds from U.S. trade policies,” Citi said. “This is marginally less dovish than its Jun assessment that the deceleration in global economic activity would lead to slower growth in the Philippines.”
Citi also said the latest BSP statement was “clearly less dovish in forward guidance,” with policy rates close to their “goldilocks” level. Future cuts were not ruled out, but would be “data dependent.”
“While leaving open the possibility of another cut, the hurdle appears higher now and will be more data-dependent, with BSP likely more sensitive to downside surprises to incoming growth vs inflation data, given aforementioned concerns on upside risks to inflation,” it said.
“We maintain expectation for 25bps cuts each in October 2025 and February 2026 for now… Our call is predicated on our forecasts for monthly inflation prints to remain below the floor of BSP’s 2 percent to 4 percent target range until February 2026, as well as our growth forecast of 5.3 percent in both 2025 and 2026, lower than the official growth target of 5.5 percent to 6.5 percent,” Citi said.
