Philippine Central Bank Cuts Interest Rates Again, Signals More Reductions Ahead

The Bangko Sentral ng Pilipinas (BSP) has reduced interest rates by 25 basis points to 5.75%. This marks the third consecutive meeting where rates have been cut. The bank also signaled that similar-sized rate cuts could occur in the coming quarters.

The decision to lower the policy rate was accurately predicted by 24 analysts, including our team. Since August, the total reduction in the policy rate has reached 75 basis points.

Over the past year, there has been a significant decline in inflation, allowing the central bank to continue easing its monetary policy. Further cuts are expected in the coming months. In November, the headline inflation rate was reported at 2.5% year-on-year, comfortably within the BSP's target range of 2-4%.

During a press conference, President Remolana stated that the bank would proceed with "small steps," expressing concerns about the potential for inflation to rise again. A strong economy provides the BSP with the groundwork to maintain gradual rate cuts, as GDP growth rebounded in the third quarter of the year.

Despite tightening fiscal policy and weak global demand constraints, robust consumption is expected to ensure another solid year of growth in 2025. GDP growth for next year is projected to be 5.8%.

Capital Economics analysts noted, "We expect an additional 100 basis points of cuts in 2025. The analyst consensus agrees with our view that rates will be at 4.75% by the end of 2025."