Policy easing likely until early 2026

THE BANGKO SENTRAL ng Pilipinas (BSP) is expected to deliver two more 25-basis-point (bp) cuts until early next year following the central bank chief’s dovish comments, analysts said.

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This came after the Monetary Board last week unexpectedly trimmed the key policy rate by 25 bps to a three-year low of 4.75%, a move that BSP Governor Eli M. Remolona, Jr. attributed to weakening business sentiment amid the widening flood control corruption mess.

“We never bought into Mr. Remolona’s talk of a ‘sweet spot’ in August and, with corporate sentiment going from underwhelming to outright miserable, we reckon more monetary easing is in the pipeline until early next year,’ Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco and Asia Economist Meekita Gupta said in a report.

“We still see a 25-bp cut in December and we’ve added an additional reduction in (the first quarter next year), taking the TRR (target reverse repurchase) rate to a terminal of 4.25%,” they added.

If realized, the policy rate of 4.25% would be the lowest in over three years or since August 2022 and would match the rate in September 2022.

Mr. Remolona had also signaled at least two more cuts at its December meeting and by next year, noting the BSP now sees the neutral nominal policy rate to be closer to 4% than their earlier projection of 5%.