More BSP rate cuts seen as price pressures curbed

Inflation may have surprised on the upside in December, but economists said the Bangko Sentral ng Pilipinas (BSP) still has room to continue easing this year, with some even seeing deeper rate cuts ahead as growth risks mount and price pressures remain largely contained.

- KEISHA TA-ASAN

In its Asia economic monthly report, Nomura Global Markets Research said the Philippine central bank may deliver two 25-basis-point cuts this year, one in each of the Monetary Board's meetings in February and April.

If realized, this could bring the country's key policy rate down to four percent from 4.50 percent currently and raise the total easing since August 2024 to 250 basis points from 200 bps.

"Our forecast is underpinned by our more cautious view on the growth outlook, which is the overriding policy consideration for BSP. The negative output gap has widened sharply, adding to a benign inflation outlook," Nomura research analysts Euben Paracuelles and Yiru Chen said.

Headline inflation rose to 1.8 percent year-on-year in December from 1.5 percent in November. This brought average inflation to 1.7 percent for 2025, still below the BSP's two to four percent target.

Nomura forecasts average inflation of 2.5 percent in 2026, as low oil prices, subdued demand-side pressures and the government's likely maintenance of supply-side measures would keep prices low.