IMF sees room for big rate cut

Up to 50 bps likely in Q1

- By KEISHA TA-ASAN

The Bangko Sentral ng Pilipinas (BSP) is expected to further reduce its policy rate amid a favorable inflation outlook and rising downside risks to growth, according to the International Monetary Fund.

The IMF, in its staff report for the 2025 Article IV Consultation, said its baseline projection "incorporates another 50-basis-point reduction in the policy rate" by the first quarter of 2026. The cuts are expected to bring the real interest rate toward the lower bound of the IMF's estimated natural rate range.

"With headline inflation below the midpoint of the target band, expectations anchored and an emerging negative output gap in 2025, the projected accommodative stance is appropriate," the report said.

However, the IMF emphasized that monetary policy should remain data-driven, with the BSP guided by new information on the inflation outlook amid uncertainty over the output gap, the natural rate and two-sided inflation risks.