The policy-setting Monetary Board now looks more likely to cut key rates after inflation slipped below expectations and hit a 5½-year low in April, analysts said on Wednesday.
Progress on the inflation front will create room for further monetary policy easing the rest of the year, Sarah Tan, economist at Moody’s Analytics, said.
“We anticipate at least one more 25-basis-point rate cut in the second half of 2025,” Tan said in a report sent on Wednesday.
Inflation slowed further to 1.4 percent in April from 1.8 percent in March, driven by lower rice prices and easing food costs, the Philippine Statistics Authority announced on Tuesday.
April’s inflation rate was the lowest since November 2019, when it sank to 1.2 percent.
Tan said a lower policy rate would help ease the financial burden on Filipino households.
“It will also provide some relief to the domestic economy, offsetting the negative effects of a weakening trade environment as US tariff increases,” Tan said.
Moody’s expects inflation to stay close to the lower end of the BSP’s target range of 2 percent to 4 percent for gthe whole of 2025.
“Even if global inflation rises due to supply-chain disruptions stemming from evolving US trade policies, it is unlikely that inflation in the Philippines will exceed the upper limit of the target range,” Tan said.
During its Monetary Board meeting on April 10, the Bangko Sentral ng Pilipinas (BSP) decided to cut its Target Reverse Repurchase Rate rate by 25 basis points to 5.5 percent, citing a more manageable inflation outlook.
Interest rates on overnight deposits were adjusted accordingly to 5 percent, and the lending facilities to 6 percent.
Euben Paracuelles and Nabila Amani, analysts at Nomura Global Markets Research, reiterated their call for the BSP to deliver an additional 75 bps in rate cuts this year.
“This would bring total rate cuts in this cycle to 175 bps, which would be among the most decisive in the region,” they said in a report.
The cut would bring the key rate to 4.75 percent, below the 5 percent that Nomura Global sees as the BSP’s neutral rate.
“We assign a fairly high likelihood to BSP delivering another 25 bps cut at its next meeting on June 19,” Nomura Global’s analysts said.
They also lowered their CPI inflation forecasts for full-year 2025 to 1.8 percent from 2.2 percent, and 2.7 percent from 2.9 percent in 2026.
“April inflation marks three successive months of substantial declines in headline inflation, which has now been below BSP’s 2-4 percent target since March,” Paracuelles and Amani said.
Aris Dacanay, HSBC economist for Asean, said low inflation is likely to support domestic demand moving forward, “offsetting some of the headwinds in trade and bolstering the economy’s resilience.”
“Headline CPI continues to slide fast. Though electricity rates and train fares were hiked during April, the decline in food prices were more than enough to bring inflation down,” Dacanay said.
The weak inflation print is “good news for the Philippine economy at a time when uncertainty looms over the outlook of trade and the global economy,” he added.
HSBC’s baseline scenario places the BSP’s policy rate at 5 percent by the fourth quarter of 2025. It expects the central bank to implement a rate cut in August.
Deepali Bhargava, ING regional head of research for Asia-Pacific, said the odds that the central bank will continue to cut rates are getting higher.
“The lower-than-expected inflation trajectory, stronger-than-expected local currency, and high real rates, combined with uncertainty on global growth, reinforce our view that the monetary policy easing from the BSP is far from over,” Bhargava said in a separate report.
She said ING is adding another rate cut to their 2025 forecast, with the policy rate ending the year at 5 percent.
“We now expect the policy rate to reach 4.75 percent by the end of the year. Much of the tariff story will continue to unfold before the next policy meeting in June. Fresh threats to global growth and a modest inflation reading for May would keep considerations of a June cut alive,” Bhargava said.
ING is revising its CPI inflation forecast to 2.4 percent this year from 2.8 percent.
“This is based on lower-than-expected readings in the first quarter, a significant drop in oil prices, and a sharp appreciation in the local currency,” Bhargava said.
