BSP rate cut signals dovish shift - analysts

The Bangko Sentral ng Pilipinas (BSP) trimmed its key interest rate by 25 basis points (bps) to 5.5 percent last week, a move widely expected by analysts who now view the central bank turning increasingly dovish in response to softening inflation and rising global uncertainties.

- By KEISHA TA-ASAN

"The BSP has shifted to a dovish tone, citing a more benign inflation outlook as well as substantial downside risks to growth," Aris Dacanay, ASEAN economist at HSBC Global Research, said.

Dacanay noted that inflation has surprised to the downside, with March headline consumer prices easing to 1.8 percent, well below the BSP's two to four percent target range.

"Domestic conditions already warranted a policy rate cut, with household demand for big-ticket items tepid over the past two quarters," he said.

HSBC expects the BSP to cut rates two more times this year, likely by 25 bps in August and another in December. This would bring the key policy rate down to five percent by yearend.