BSP seen cutting policy rates until 2026

BMI forecasts that the Bangko Sentral ng Pilipinas (BSP) will continue to lower its policy rates until 2026, citing expectations of benign inflation and slowing economic growth.

The Monetary Board is projected to implement another 25 basis points rate cut in the fourth quarter, most likely in December, after already trimming its policy rate to 5% on August 28.

BMI sees the policy rate settling at 5% in October, before a 25-bp cut in December, stating that BSP Governor Eli M. Remolona, Jr. described the economy as being in a 'sweet spot,' indicating a preference to stand pat in October.

Easing inflationary pressure towards the end of 2025 will provide the central bank with the space to cut.

BMI expects inflation to average 1.6% this year, slightly below the central bank's 1.7% projection.

For 2026, BMI now forecasts the BSP to deliver 50 bps worth of rate cuts, instead of 25 bps previously, which would bring the key rate to 4.25% by end-2026.