The Bangko Sentral ng Pilipinas (BSP) is expected to keep its policy rate at 5 percent during its Oct. 9 meeting, with a potential final rate cut in December as inflation is projected to return to target.
The BSP’s Monetary Board is anticipated to adopt a cautious stance due to the impact of recent typhoons on food supply and the peso’s recent weakness against the dollar, said Manulife Investment Management head of fixed income Jean de Castro.
“The Monetary Board is widely expected to hold its policy rate at five percent, balancing the recent return of inflation toward target with persistent upside risks from food supply shocks and peso volatility,” de Castro said.
She said a final rate cut is possible if economic momentum weakens or the US Federal Reserve eases further. “However, with inflation generally contained and liquidity conditions manageable, the BSP could cut policy rate one more time in December,” de Castro said.
De Castro said inflation rate would likely return to the BSP’s 2-percent to 4-percent target band after six consecutive months below the range.
The rebound is attributed to rising prices of rice, fish and fuel, although this has been moderated by lower vegetable prices.
“Supported by lower rice import tariffs and subdued global oil prices, inflation is expected to return to the two percent to four percent target band defined by the BSP by the end of 2025,” de Castro said.
Upside risks remain, including sticky food prices from typhoon-related supply shocks and the extended rice import ban, as well as potential peso depreciation beyond P58 per dollar, de Castro said.
She said the BSP’s strong gross international reserves (GIR) would provide a critical buffer for peso stability and investor confidence. The BSP projects GIR to settle between $105 billion and $106 billion in 2025.
“This significant reserve safeguard aids in shielding the peso from external shocks and volatility, particularly amid global uncertainties and the potential for further depreciation beyond P58 per dollar,” de Castro said, noting it also reassures investors of the Philippines’ capacity to fulfill external obligations and maintain financial stability.
