The Bangko Sentral ng Pilipinas’ Monetary Board is expected to reduce key interest rates in its first policy meeting next year.
“We would be open to a cut [ in the first meeting next year] given the data,” BSP Governor Eli Remolona Jr. said in an interview with Bloomberg TV.
Oxford Economics said it is also maintaining its expectation that the BSP easing cycle would continue at the next meeting in the first quarter. “We anticipate a total of 75 bps cuts next year,” it said.
Oxford Economics said, however, the interest rate reduction on Dec. 19 increased the peso depreciation risks, and the pass-through effect of a weaker peso on inflation would be a concern for BSP.
Remolona has yet to disclose the date of the first policy meeting next year, but the Monetary Board will meet six times in 2025.
“Looking at all the data, what we’ve decided is that we more or less stay in the same trajectory. So as you know, it’s really two decisions. It’s a decision on the policy rate, and then it’s a decision on the trajectory. We decided to ease the policy rate, but it’s more or less going to be on the same trajectory as before,” Remolona said.
“Well, it’s not that trajectory of the last few months. It’s a trajectory that we’ve described in our forward guidance. So it’s a trajectory going forward, and we haven’t really changed that…I wouldn’t say more cuts than we were leaning to before, but we’re leaning towards additional cuts in 2025,” he said.
The MB, in its Dec. 20 meeting, reduced the BSP’s overnight borrowing rate by 25 basis points to 5.75 percent.
The interest rates on the overnight deposit and lending facilities were accordingly adjusted to 5.25 percent and 6.25 percent, respectively.
“Inflation is projected to stay within the target range over the policy horizon. The risk-adjusted inflation forecast for 2025 has risen slightly to 3.4 percent from 3.3 percent in the previous meeting,” the BSP said.
For 2026, the BSP said the risk-adjusted forecast is unchanged at 3.7 percent. “Inflation expectations remain well-anchored,” it said.
“The balance of risks to the inflation outlook continues to lean to the upside due largely to potential upward adjustments in transport fares and electricity rates. The impact of lower import tariffs on rice remains the main downside risk to inflation,” it said.
