The Bangko Sentral ng Pilipinas (BSP) is expected to reduce interest rates by another 25 basis points at its April 23 policy meeting, which would bring the benchmark rate to 4.0 percent and likely signal the end of the current easing cycle, BMI said.
The projection follows the BSP Monetary Board’s decision on Thursday to reduce its overnight borrowing rate by 25 basis points to 4.25 percent.
The move was supported by manageable inflation and signs of recovery in economic sentiment, but BMI noted that growth remains a primary concern for the central bank alongside price stability.
Economic momentum is expected to remain subdued through the first half of 2026 as sluggishness from late 2025 persists, it said. Analysts pointed to domestic and external challenges, including a corruption probe affecting government infrastructure spending and 19 percent reciprocal tariffs on US exports impacting the trade sector.
“Government infrastructure outlays continue to be plagued by the corruption probe. The export sector also faces renewed pressure as the effects of the 19 percent ‘reciprocal’ tariffs on US exports start to bite,” BMI said.
If the April cut materializes, the Fitch Solutions unit expects it to be the final move in the cycle. “We expect the April rate cut that we forecast to mark the end of the easing cycle, leaving the terminal rate at 4.0 percent,” the group said.
The outlook accounts for a projected uptick in inflation driven by higher electricity tariffs and the potential pass-through effects of flexible rice tariffs. BMI also warned that lowering rates below 4.00 percent could trigger depreciatory pressure on the local currency.
While the latest cut narrowed the interest rate differential between the Philippines and the US to 50 basis points, the Federal Reserve is expected to cut rates by another 50 basis points this year. This could widen the gap to 75 basis points by the end of 2026.
Despite this, BMI expects the Philippine currency to remain under pressure. “That said, the deteriorating external position will keep the peso weak, and we forecast the peso to weaken gradually towards 59.50 against the US dollar by end-2026, even absent further easing,” BMI said.
Full-year economic growth is forecasted at 5.2 percent, with a recovery anticipated in the second half of 2026. This pickup is expected to be driven by a rebound in public capital expenditure and the delayed impact of 275 basis points in cumulative rate cuts since August 2025.
“We expect public capex to recover and the low base to flatter year-on-year growth. The lagged effects of the cumulative 250 bps of cuts since August 2025 – and the additional 25 bps that we forecast – will also start to feed through and support growth,” BMI said.
