Interest Rates Headed for Another Reduction

The Bangko Sentral ng Pilipinas (BSP) is widely expected to deliver another 25-basis-point cut in benchmark interest rates this week, with analysts pointing to easing inflation and sluggish economic growth as key reasons for further monetary easing.

- KEISHA TA-ASAN

A rate reduction on Aug. 28 would mark the BSP's third consecutive cut this year, bringing the policy rate down to five percent from the current 5.25 percent level.

Union Bank of the Philippines chief economist Carlo Asuncion said a quarter-point cut is the most likely outcome given both domestic and global conditions.

"Based on BSP Governor Eli Remolona Jr.'s forward guidance and prevailing macro conditions, a 25-basis-point cut is the most likely scenario. This would continue the central bank's easing cycle that began in August 2024," Asuncion said.

Headline inflation eased to just 0.9 percent in July, the lowest since November 2019, bringing the year-to-date average to 1.7 percent, well below the BSP's two to four percent target range.

At the same time, gross domestic product (GDP) grew by 5.4 percent in the first half, slightly below the government's goal of 5.5 to 6.5 percent for the year.

Bank of the Philippine Islands lead economist Jun Neri said the BSP seems determined to cut rates further in the fourth quarter and even into 2026, but warned that an uncertain outlook may force the central bank to reverse some of its actions later.