The Bangko Sentral ng Pilipinas (BSP) is expected to reduce its key policy rates by another 50 basis points (bps) with cuts in December 2025 and February 2026, following a surprise rate adjustment on Thursday, US financial group Citi said in a report.
Citi projects the central bank’s terminal policy rate to be 4.25 percent, down from its previous forecast of 4.5 percent.
“Following ]Thursday’s] cut, we continue to expect 25 bps cuts each in December 25 and February 26, with a lower terminal rate of 4.25 percent,” Citi said.
The BSP, which surprised the market by cutting its reverse repurchase (RRP) rate by 25 bps to 4.75 percent, has been prompted by a downwardly revised inflation outlook and a “weakened” growth outlook.
The BSP’s latest move came against the consensus of 19 out of 26 analysts surveyed by Bloomberg, who had expected a hold.
The BSP’s statement and subsequent press conference were seen as “clearly dovish,” with inflation risks now viewed as “limited” and the outlook for domestic growth, particularly due to the impact on business confidence of governance concerns, having “weakened,” Citi said.
BSP Governor Remolona noted that the “Goldilocks” policy rate—the non-inflationary neutral rate—is now possibly closer to 4 percent, compared to a previous estimate of 5 percent.
He also saw a greater probability that growth would be “slightly below” the official 2025 target of at least 5.5 percent and the 2026 target of 6 percent. Citi forecasts economic growth of 5.3 percent for both 2025 and 2026.
The BSP maintained its 2025 inflation forecast at 1.7 percent, but lowered its 2026 forecast by 20 bps to 3.1 percent and its 2027 forecast by a sizeable 60 bps to 2.8 percent.
Citi said it expects the next 25 bps cut at the Dec. 11, 2025 meeting, consistent with Remolona’s comments that one more cut in 2025 is “possible.” The second 25 bps cut is expected at the February 2026 meeting, it said.
