BMI sees 25-bp rate cut next week

THE BANGKO SENTRAL ng Pilipinas (BSP) is likely to cut benchmark interest rates by 25 basis points (bps) at its meeting next week amid a stable peso and slowing inflation, Fitch Solutions’ unit BMI said.

“We expect the BSP to cut its policy interest rate by 25 bps next week. The peso has stabilized in recent weeks, inflation is barely above the 2% target lower bound at 2.1%, while growth underperformed government targets in 2024,” BMI said in a report.

The Monetary Board will meet to review policy on April 10. A 25-bp cut will bring the policy rate to 5.5% from 5.75% currently.

At its Feb. 13 meeting, the Monetary Board unexpectedly kept benchmark rates unchanged amid uncertainty stemming from the Trump administration’s policies.

BSP Governor Eli M. Remolona, Jr. said last week that there is a “good chance” that the Monetary Board will cut rates by 25 bps at next week’s meeting.

He said the BSP remains on an easing cycle and could reduce borrowing costs by as much as 75 bps this year depending on data.

The central bank has brought down benchmark interest rates by a total of 75 bps since it began its rate-cut cycle in August last year.

BMI said Mr. Remolona’s comments on possibly cutting borrowing costs by a cumulative 75 bps for 2025 align with their own forecast that the policy rate will be at 5% by yearend.

“Overall, inflation in the Philippines has shown signs of a slow easing. Inflation figures for February 2025 (latest data available) came in at 2.1% year on year, the slowest price hike since September 2024. This would support the BSP cuts…,” it said.

Lower benchmark rates would reduce debt servicing costs, which would be positive for consumer spending, BMI added.

It expects household spending growth to accelerate to 5.3% this year from 5% in 2024, it said, or to P13.2 trillion in real terms.

“Spending will remain influenced by the elevated inflationary pressures seen over 2025 as well as currently high debt levels, along with related debt servicing costs,” BMI said.

“A tight labor market will support spending, as real wage growth returns to positive territory, which will support purchasing power over the year.”

The BSP expects headline inflation to average 3.5% this year, within its 2-4% annual target.

In the first two months, the consumer price index (CPI) averaged 2.5%.

The central bank said in its latest Monetary Policy report that the CPI could exceed the 2-4% annual goal in the latter part of 2025 due to base effects, but the full-year print would be within target amid declining rice prices.

For this year, inflationary pressures could come from “higher global oil and non-oil prices, peso depreciation, and recent above-expectation inflation readings,” the BSP said. — A.R.A. Inosante