BSP rate cuts to proceed amid greater uncertainty

While Citi anticipates the Bangko Sentral ng Pilipinas (BSP) to resume cutting key borrowing costs by 25 basis points (bps) at its April 10 policy meeting, March’s low inflation, coupled with global trade risks, could prompt the central bank to further reduce rates sooner than expected.

- By DERCO ROSAL

March’s 1.8-percent price increase rate—the lowest in nearly five years or since the pandemic’s onset in early 2020—was at the lower end of the central bank’s forecast range of 1.7 percent to 2.5 percent for the month.

Citi believes that given this lower-than-expected inflation rate, coupled with external headwinds, the BSP could reduce benchmark rates two months earlier than its previous projection.

That means anticipated cuts in August and December could be brought forward to June and October, respectively.

Should the BSP carry out a quarter-point cut in the next three policy meetings, the key interest rate would settle at five percent, down from the current 5.75-percent rate.

Assuming inflation would steady over the next year, Citi projects the BSP to lower rates by a total of 50 bps in 2026, clocking in at 4.5 percent.