BSP likely to cut policy rate anew

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is widely expected to cut its benchmark interest rate by another 25 basis points this week, as analysts cite benign inflation, tepid economic growth and a stable exchange rate.

The BSP’s Monetary Board, which has so far slashed borrowing costs by a total of 100 basis points since August last year, is set to meet for the third time this year on June 19.

Economists believe the BSP has enough room to lower the key policy rate to 5.25 percent from the current 5.5 percent amid easing price pressures and sluggish first-quarter gross domestic product (GDP) performance.

“We expect the BSP to cut the policy rate by 25 basis points on June 19, supported by below-target headline inflation, stable core inflation and a manageable exchange rate,” Jun Neri, lead economist at Bank of the Philippine Islands, said.

Neri said that inflation is still projected to stay within the BSP’s two to four percent target range even if favorable base effects fade later this year.

The central bank may also be inclined to support economic growth, which has underperformed expectations.

However, Neri cautioned that any further cuts after June would likely depend on external conditions, such as a potential shift in US monetary policy or a spike in oil prices following heightened geopolitical tensions in the Middle East.

Similarly, HSBC ASEAN economist Aris Dacanay said the BSP has room to resume easing, especially after inflation dropped to just 1.3 percent year-on-year in May.

“We now expect the BSP to cut its policy rate by 25 basis points to 5.25 percent next week,” Dacanay said, reversing HSBC’s earlier forecast of a pause.

“Given how retail rice prices haven’t plunged as low as global rice prices did, there is still room for food and overall inflation to remain subdued throughout the rest of 2025,” he said.

Dacanay added that the weaker-than-expected 5.4 percent GDP growth in the first quarter also puts pressure on the BSP to act sooner, particularly to boost the competitiveness of the peso and support the country’s services exports.

Pantheon Macroeconomics chief emerging Asia economist Miguel Chanco described the expected rate cut as “arguably easy,” citing slow economic momentum and inflation staying “comfortably below” target through yearend.

For UnionBank chief economist Ruben Carlo Asuncion, inflation bottoming out in May should not delay the BSP’s easing move. “Now is the time to lock in gains from the favorable inflation backdrop,” Asuncion said.

Other institutions echoed similar views. ING Bank said high real interest rates, a stronger peso and slowing global growth justify extending the easing cycle. ANZ Research also expects the BSP to cut rates to 5.25 percent next week and sees another cut to five percent by the third quarter.

“Inflation has fallen sharply over the past three months and is at its lowest since November 2019,” ANZ said. “Given the manageable inflation outlook, we think the BSP will lower the policy rate by another 50 bps by the third quarter of 2025,” it said.

The BSP last cut its key rate in April by 25 basis points, describing the current stance as “slightly restrictive.” With inflation slowing and economic growth showing signs of strain, analysts believe the central bank has room to provide more support while keeping inflation expectations in check.