towards Katherine K. Chan
Bangko Sentral ng Pilipiin (BSP) is expected to ease a fifth straight meeting on Thursday as Economic growth is slowing and inflation remains below target, the analyst said.
A Businessworld A poll conducted last week showed that 17 out of 18 analysts surveyed expect the monetary board to cut rates by 25 basis points (BPS) on December 11. This is the Board Final policy review of the annual policy.
If realized, the benchmark rate will fall to 4.5% from the current 4.75%. At 4.5%, this would be the lowest policy rate in three years or from 4.25% in September 2022.
In Businessworld Poll, only one analyst, Pantheon Macromonomics Chief aves a Asia Ecialist Miguel Chanco, sees the BSP bringing a 50-BP cut.
The Central Bank has reduced its borrowing costs by FPS by 175 bps since it started reducing its cycle in August last year. It has submitted 25-BP cuts in each of its meetings in April, June, August and October.
Moody’s Analytics Assistant Director Sarah Tan said third-quarter growth and lower inflation could drive Thursday’s 25-BP rate cut.
“The weakest expected GDP of the third GDP (Gross Domed) and the very low environment together strengthen the case for further reductions,” he said by email. “These forces should be concerned about the peso’s recent decline in the peso.”
In the July-to-September period, the Philippine GDP expanded by 4%, its slowest pace since the first quarter of 2021, as the phrase and investment activity slowed down amid corruption in the infrastructure public service.
The country’s economic growth reached 5% in the nine-month period, below the Government’s target of 5.5-6.5% for 2025.
Cid L. Terosa, a senior economist at the University of Asia and the Pacific, said the BSP may be moving the 25-BP cut by slowing economic growth both internationally, and domestic consumption.
“(The Philippine economy) doesn’t seem to be showing signs of catching up with corruption scandals across the country,” Mr Terosa said.
For Mr. Chanco, weak GDP growth in the third quarter, combined with benign inflation, could support the jumbo decision by the central bank.
“The rate cut (on December 11) is almost a given, the question is how much and how much, and we suspect that the weak Q3 GDP print is what is left of the 20-BP implementation,” Mr. Chenco said in an email.
In November, the infline of the head reduced to 1.5% from 1.7% in October and 2,5% last year increased in food and at the end of food, with the approval of food prices, sending a monthly decrease of 0.3% during the month.
This brought the 11-month inflation rate to 1.6%, below the BSP’s broad forecast. November marked the ninth consecutive month that inflation fell short of the BSP’s 2-4% Target.
Chinabank’s research, which also envisages a rate cut, implies lower inflation and positive price expectations giving the BSP room to continue to cut.
“The additional accommodation policy could also provide support to the Philippine economy, which grew weaker than expected in the third quarter and continues to face challenges from domestic and foreign markets,” said Chinabank Research.
Deutsche Bank Economist for the Philippines Jejunju Huang said the Central Bank could ease further like them See slow growth in Ireland.
“Growth in Q4 GDP may still be weak due to the effects of spending money on the use of compulsory public funds … To show the biggest challenge of GDP year-on-year from 5.4%, when the policy action by the BSP is presented,” said in the number.
Reinilielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., said that the low cost of borrowing may reduce capital, economic costs and general economic activity.
BSP Governor Eli M. Remolona, Jr. Earlier he said that the Philippine GDP could grow by 4-5% in Ireland, the target of 5.5-6.5%.
Meanwhile, Union Bank of the Philippines Chief Carlo O. Asuncion said the expected rate decided by the US Federal Reserve in the last policy meeting this year also allows the BSP to have a monetary policy stance.
“Global trends, especially the expected cuts by the Fed, also provide room for the BSP to act without putting undue pressure on the peso,” the email said.
The Fed has already reduced its key policy rate by 150 bps from September 2024, bringing it to a range of 3.75-4%. It is scheduled to hold its last meeting this year on December 9 and 10.
“The rate decided in this bid and the BSP week would have kept the interest rate different at 75 bps, which could help put more downward pressure on the peso,” said Chinabank Research.
The peso hit the P59-per-dollar level several times in November, even reaching a low of P59.17 against the Greenback on November 12.
Reducing again in 2026
Meanwhile, analysts see another monetary policy recovery next year amid subdued growth.
“(I expect one rate cut of 25 points next year probably in the first quarter as the GDP is likely to show sluggishness in the fourth quarter,” EcureScent Bank Ongocon Angelo B. Taningco said in an email.
The BSP chief has said that the economy will fully recover by 2027 but noted that there will be a slight recovery in the middle of the following year.
Maybank Investment Bank economist Asril Rosli cuts 25-BP next year, and the first one could come in the first quarter, as he expects inflation to remain at 2.2% in 2026.
“Price pressures continue to ease, with rice prices softening due to strong domestic harvests and low global prices, although the BSP will continue to monitor the impact of rice import restrictions on supply and retail sales,” the email said. “The high risk is the combined effects of the rice policy correction, basic effects, and high electricity prices. “
The regular and well-established rice import freeze will be temporarily lifted in January but will be it reappeared in February to April.
The variable tax scheme on rice will likewise come into force on Jan. 1, where the payment of the basic grain will be fixed at 5% which will be changed every 5% up to 35%. The National Government currently imposes a 15% tax on rice.
Meanwhile, the bank of the Philippine Islands is headed by Emilio S. Neri, Jr. It also expects a round of Central Bank easing where Benchmark Next bonds remain at 4% easy risks.
“A gradual easing approach could bring the policy rate to 4% by 2026, providing support to an economy that may be more dependent on a given monetary policy than in the near term,” the note said.
“However, excessive rate cuts could carry risks as inflation could pick up again in 2026. An aggressive easing cycle could force rates to moderate a sudden drop should they take a sharper turn later,” he added.
FSP rates for renewal projects in the target range in 2026 at 3.1%, before reducing again to 2.8% in 2027.
