HSBC sees deeper rate cuts ahead

The Bangko Sentral ng Pilipinas’ (BSP) recent shift toward a less hawkish stance has prompted HSBC to revise its outlook, with the British banking giant now forecasting two additional interest rate cuts by year-end.

- By DERCO ROSAL

According to HSBC ASEAN economist Aris Dacanay, the bank expects two 25 basis point (bp) reductions from the BSP this year, bringing the key rate down to five percent, supported by contained inflation.

Dacanay also expects another quarter-point cut in the first quarter of 2026, which would lower the rate further to 4.5 percent.

“Given the performance of inflation so far, the BSP, we believe, has the runway to quicken and, most especially, deepen its easing cycle,” Dacanay said in a commentary published Friday, Aug. 22.

The rate of increase in consumer prices reached its lowest pace in nearly six years in July at 0.9 percent. It can be recalled that this below one-percent inflation rate was driven by the steepest drop in rice prices in July since 1995.

Citing tamest inflation, Dacanay now expects the BSP to deliver another 25 bps reduction next week, which, if realized, would bring the key policy rate down to five percent from the current 5.25 percent.