BSP seen to cut policy rate by 25 basis points on June 19

Economists and financial analysts anticipate the Bangko Sentral ng Pilipinas (BSP) will reduce its policy rate by 25 basis points to 5.25 percent on June 19, driven by lower-than-expected inflation.

The latest inflation rate dropped to 1.3 percent in May, falling below the BSP's target range.

This disinflation provides a strong justification for further easing by the Monetary Board (MB).

Despite subdued inflation, the first-quarter economic growth remained stable at 5.4 percent, though it was slower compared to the same period last year.

A policy rate cut is expected to stimulate economic growth by making exports more competitive and encouraging businesses to increase production and investment.

External factors like higher US tariffs and global economic uncertainties pose risks to the country's growth prospects.

The BSP has room to cut interest rates as the US Federal Reserve is expected to maintain its rates, and the peso's exchange rate remains favorable, with falling global oil prices contributing to a strong peso.

Analysts forecast inflation to be around 1.8 percent for 2025 and 3 percent for 2026, but the BSP must remain cautious of potential upside risks.

Potential risks to inflation include proposed increases in rice tariffs and escalating geopolitical tensions affecting global oil prices.