BSP rate cut looms as inflation slows

Following the sharp deceleration in the consumer price index (CPI), analysts are turning more optimistic on the inflation outlook and see more room for the Bangko Sentral ng Pilipinas (BSP) to start cutting interest rates, possibly sooner and deeper than earlier expected.

- By KEISHA TA-ASAN

Headline inflation cooled to 1.4 percent in April from 1.8 percent in March, marking the lowest level since late 2019. This was also below the BSP's two to four percent target for the second straight month.

The decline, largely driven by falling food prices, especially rice, has prompted economists to revise their projections and policy expectations.

Nomura economists Euben Paracuelles and Nabila Amani see inflation remaining well below target in the near term, prompting a more dovish stance on BSP policy.

"We further lower our CPI inflation forecasts to 1.8 percent (from 2.2 percent) for 2025 and to 2.7 percent (from 2.9 percent) for 2026," they said, citing a negative output gap and continued supply-side easing such as low oil prices and reduced rice tariffs.

Nomura Global Markets Research expects the central bank to deliver an additional 75 basis points of rate cuts this year. This would bring total rate cuts in this cycle to a total of 175 bps, among the deepest in the region.