Philippines central bank cuts rates again, signals more ahead

Investing.com — The Central Bank of the Philippines (BSP) has cut its rates by 25 basis points to 5.75%, marking the third consecutive meeting at which rates have been reduced. The bank also signaled that future rate cuts of the same magnitude are likely in the upcoming quarters.

The decision to lower the policy rate was accurately forecasted by 24 analysts, including our own team. Since August, the policy rate has been reduced by a total of 75 basis points.

The past year has seen a significant decrease in inflation, providing the central bank with the opportunity to continue the easing of its monetary policy. Further cuts are anticipated in the following months. The headline rate was reported at 2.5% year-on-year in November, which falls comfortably within the BSP’s target range of 2-4%.

During a press conference, Governor Remolana noted that the bank will proceed with “baby steps”, expressing concern about the potential for inflation to rise again. The strong economy provides the BSP with the foundation to maintain gradual rate cuts. GDP growth made a comeback in the third quarter of the year.

Despite the constraints of a strict fiscal policy and weaker global demand, robust consumption is expected to ensure another year of solid growth in 2025. The GDP growth for next year is projected to be 5.8%.

“We expect a further 100bps of cuts in 2025. The analyst consensus has come round to our view that rates will end 2025 at 4.75%,” Capital Economics analysts said in a note.

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