Another rate cut looms in June – BMI

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is expected to deliver another 25-basis-point (bp) interest rate cut in June following its latest monetary easing move, according to BMI Country Risk & Industry Research.

Last week, the BSP reduced its benchmark policy rate by 25 bps to 5.50 percent, in line with market expectations. BMI said this move signals a shift to a more accommodative stance amid manageable inflation and growing downside risks to the country’s economic outlook.

“We maintain our forecast that the BSP will further lower rates by 50 basis points to five percent in 2025,” BMI said. “We are holding off from revising our projection, until there is more clarity on how US’ protectionism policies will evolve.”

“What we can say with confidence is that the BSP will look for another 25 bp cut at the next meeting scheduled on June 19,” the Fitch Solutions unit said.

Headline inflation slowed to a near five-year low of 1.8 percent in March from 2.1 percent in February. Inflation is expected to average 2.6 percent for the year, comfortably within the BSP’s two to four percent target range.

This subdued inflation gives policymakers “the flexibility for another rate cut,” BMI noted.

Furthermore, BMI flagged increasing external risks, particularly from US protectionist measures under the Trump administration.

While a planned 17-percent tariff on Philippine goods was temporarily shelved in favor of a 10-percent rate, the uncertainty continues to weigh on the country’s export-dependent economy.

“Trump’s tariffs have compounded the challenges faced by the Philippine economy, having already underperformed in the fourth quarter,” BMI said.

“Prompt policy support will be crucial for achieving the government’s six-percent lower bound growth target,” it said.

BMI said that if the US moves forward with the steeper 17-percent tariff, it could revise its forecast to include more rate cuts beyond the expected June easing.