Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said Friday he is “pretty much on the fence” or undecided on the need for further interest rate cuts after the central bank delivered its fifth consecutive reduction to 4.50 percent.
Remolona told Bloomberg’s The China Show that any further monetary easing would require weaker-than-expected growth and a more negative output gap.
The Monetary Board, which he chairs, cut the overnight borrowing rate by 25 basis points (bps) on Thursday amid a weakened growth outlook and a four percent economic slowdown in the third quarter.
Remolona said the latest rate cut was partly intended to compensate for a loss of business confidence following an infrastructure scandal.
“We found with our latest data that there was room for a cut. Inflation was very manageable and then growth was weak, but the weakness in growth was partly due to a loss of confidence because of an infrastructure scandal,” Remolona said.
While he acknowledged the BSP could not resolve the issue, Remolona said it could compensate by reducing policy rates to boost growth.
When asked if the scandal, a weakening peso which recently hit a record low of 59.22, and the possibility of capital outflows kept the central bank on the fence, Remolona indicated the board may or may not cut key policy rates further.
“I would say pretty much on the fence, yes. I think we may cut one more time or we may not. That’s where we are,” he said.
Remolona said that with inflation projected to be near 3 percent by the end of 2026 and on target in 2027, the focus for rate decisions will shift to growth data.
“If growth is weaker than we had hoped, then we would cut. But as you know, we’re looking at the output gap. And so if the output gap turns out to be more negative than we thought, then we would ease,” he said.
Remolona said for now, the data do not strongly suggest further easing is necessary.
“If we get off the fence, it’s probably another rate cut. But that’s probably about it, one more rate cut,” he said.
In a report, Citi said the recent rate cut was widely anticipated, but the accompanying statement and press conference were more hawkish than expected.
The BSP raised its inflation forecasts but said expectations were “firmly anchored.” While the growth outlook “weakened further,” Citi expects a slow rebound as earlier policy easing takes effect.
Citi sees the easing cycle nearing its end with limited, data-dependent further easing. Citi projects a final 25 bps cut in February 2026 to 4.25 percent, with some reduced risk of an additional 25 bps cut after that.
