Cumulative policy rate cuts by the Bangko Sentral ng Pilipinas (BSP) have failed to trigger a decisive economic rebound as private consumption remains weak and banks tighten credit standards, a GlobalSource analyst said.
GlobalSource analyst Diwa Guinigindo said that despite substantial rate reductions, economic momentum has yet to respond decisively. He said that private consumption remains soft, business confidence is tentative, and investment activity is uneven.
The transmission of monetary easing has been constrained by the pro-cyclical moves of banks, Guinigindo said.
Many institutions have tightened credit standards even as the BSP adopted an accommodative stance, reflecting heightened risk aversion and balance sheet caution. This trend dampens loan growth and mutes the intended stimulus of lower rates.
Guinigindo said monetary policy cannot compel risk-taking or override structural constraints such as logistics inefficiencies, supply bottlenecks, regulatory uncertainty and external vulnerabilities.
“Interest rate adjustments alone cannot resolve these deeper impediments. This much the Governor of the BSP Eli Remolona admitted, literally challenging the fiscal and other executive agencies of government to do heavier lifting in economic revival. Otherwise, as we are seeing today, monetary policy could just be pushing on a string,” Guinigindo said.
The analyst suggested that a pause in the easing cycle might have been more prudent because inflation forecasts for 2026 and 2027 have risen.
According to Guinigindo, the recent rate cut reflects a mix of accommodation and caution. He described it as a “wake-up call” to Malacañang and Congress, signaling support for the economy while recognizing diminishing returns from further easing without complementary reforms.
Sustainable growth will depend on structural improvements, stronger fiscal coordination and renewed confidence in the broader economic environment rather than calibrated monetary action alone, he said.
