Poll: BSP likely to cut rates by 25 bps

The Bangko Sentral ng Pilipinas (BSP) is widely expected to cut rates for a third straight meeting on Thursday amid a continued downtrend in inflation and a slowdown in economic growth, analysts said.

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A BusinessWorld poll conducted last week showed that all 20 analysts surveyed expect the Monetary Board to cut the target reverse repurchase rate by 25 basis points (bps) at its policy meeting on Aug. 28.

If realized, this would bring the benchmark rate to 5% from the current 5.25%.

The central bank has so far lowered borrowing costs by a total of 125 bps since it began its easing cycle in August last year. It delivered two 25-bp cuts at each of its meetings in May and June.

“Inflation is currently trailing well below the BSP’s 2-4% target band, easing to as low as 0.9% year on year in July. Given the performance of inflation so far, the BSP, we believe, has the runway to quicken and, most especially, deepen its easing cycle,” HSBC economist for ASEAN (Association of Southeast Asian Nations) Aris D. Dacanay said.

Inflation fell to 0.9% in July, the lowest in nearly six years, or since the 0.6% print posted in October 2019. It also marked the fifth straight month that inflation settled below the central bank’s 2-4% target range.

“The primary catalyst for this expected policy shift stems from subdued inflationary pressures,” Maybank Economist Azril Rosli said. “We believe this persistent undershooting of the inflation target provides the BSP some room of policy space to support economic growth without compromising price stability,” he added.

For the first seven months of the year, inflation averaged 1.7%, a tad higher than the BSP’s 1.6% full-year forecast.

“Softer price growth has provided relief to both consumers and businesses, who had contended with elevated inflation from 2022 through mid-2024,” Moody’s Analytics economist Sarah Tan said in an email.

Deutsche Bank Research said inflation is likely to stay below the BSP’s 2-4% target until early 2026.