THE Monetary Board will carry on its easing cycle in June with another likely 25-basis point (bsp) cut in the Bangko Sentral ng Pilipinas (BSP) key rate in its next meeting that month, global think tank BMI Research said.
“What we can say with confidence is that the BSP will look for another 25 basis points (bps) cut at the next meeting scheduled for June 19,” BMI Research, a unit of Fitch Solutions, said in a report released on Monday.
The report noted inflation has remained subdued, dropping to a near five-year low of 1.8 percent year-on-year in March. It is projected to average 2.6 percent in 2025, well within the BSP’s target range of 2 percent to 4 percent.
“This gives the BSP the flexibility for another rate cut, as noted by (Bangko Sentral) Governor Eli Remolona, who in a post-press conference stated that ‘the more manageable inflation outlook and the risks to growth allow for a shift toward a more accommodative monetary policy stance,’” the report said.
“We maintain our forecast that the BSP will lower rates by 50 basis points to 5 percent in 2025. We are holding off from revising our projection, until there is more clarity on how US’ protectionism policies will evolve,” it added.
US President Donald Trump has paused its reciprocal tariffs for 90 days, including its planned 17 percent tariff on the Philippines.
BMI said Trump’s tariffs have compounded the challenges faced by the Philippine economy, having already underper
formed in the fourth quarter of the year.
“Prompt policy support will be crucial for achieving the government’s six percent lower bound growth target,” the report said.
“If anything, the case for more easing has strengthened. If negotiations fall through, and a 17 percent tariff on the Philippines is enacted, we will revise our policy rate forecast to pencil in more cuts,” it added.
In a separate report over the weekend, Aris Dacanay, economist at HSBC Global Research, said the BSP is expected to continue to cut its policy rate by 25 bps in August, and by another 25 bps in December, bringing the policy rate to 5 percent by year’s end.
“This implies that the BSP will cut in alternate rate-setting meetings (i.e. no rate cuts in June and October),” Dacanay said. The BSP is likely to “employ a very cautious approach when easing, given the large degree of uncertainty in global trade policy and, interrelatedly, the risk of FX volatility.”
“However, there is a downside risk [to] the easing cycle being done faster,” he added.
Dacanay cited three scenarios that could give the BSP leeway to cut policy rates in consecutive Monetary Board meetings.
First, if the global growth outlook deteriorates further, as the US reciprocal tariffs will likely take a toll on global growth; if real policy rates between the Fed and the BSP widens; and if there is strong financial inflows.
“Not only is the Philippines relatively insulated from the risk of reciprocal tariffs (due to its trade balance with the US), the country’s domestic economy is also very robust,” Dacanay said.
“If foreign investors demand Philippine assets to insulate themselves from global financial market volatility, the peso might exhibit resilience, which, in turn, could give the BSP room to cut policy rates faster or more than the Fed,” he added.
