One more BSP rate cut likely this year

THE BANGKO SENTRAL ng Pilipinas (BSP) is likely to implement just one more rate cut this year amid persistent global uncertainty, according to Deutsche Bank Research.

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“The ongoing uncertainty is likely a larger factor than interest rates in businesses holding back their decisions to borrow,” it said in a note on Monday. “We expect BSP to cut by 25 bps (basis points) in the coming August meeting.”

The forecast is more cautious than that of BSP Governor Eli M. Remolona, Jr., who said last week that there is room for two more rate cuts in 2025, as inflation stays within the 2-4% target and given the government's lower economic growth outlook.

The BSP trimmed its key policy rate by 25 bps to 5.25% in May amid easing inflation and weaker-than-expected first-quarter growth. Since mid-2024, the central bank has slashed rates by 125 bps.

“We agree to some extent, as overall credit growth has not gained much momentum despite BSP’s cumulative 125-bp rate cuts so far,” Deutsche Bank Research said.

Outstanding loans by universal and commercial banks rose by 11.12% year on year to P13.25 trillion in April, the slowest in five months.