BSP to cut rates further, inflation at nine-year low

The Bangko Sentral ng Pilipinas (BSP) is expected to continue reducing policy rates in the second half of 2025 due to easing inflation and slow economic growth.

BMI, a unit of Fitch Solutions, projects that low inflation and weak economic performance will prompt further rate cuts, bringing the benchmark policy rate to 4.75 percent by year-end.

Inflation dropped to a nine-year low of 0.9 percent in July, prompting BMI to revise its forecast for this year from 2.2 percent to 1.6 percent.

While economic growth slightly improved to 5.5 percent in the second quarter, BMI expects the BSP to maintain a pro-growth policy stance amid growing uncertainty and potential further rate cuts.

Despite these rate reductions, the Philippine peso is expected to strengthen slightly against the US dollar due to potential weakening of investor confidence in the US dollar.