Photo courtesy of Bangko Sentral ng Pilipinas.
The Bangko Sentral ng Pilipinas (BSP) could still reduce interest rates, but faster inflation in January may limit the size of any future cuts.
Miguel Chanco, economist at Pantheon Macroeconomics in London, said the central bank is likely to lower the policy rate by a quarter point at the Monetary Board meeting on February 19, though a larger reduction seems unlikely after core inflation accelerated.
Core inflation, which excludes food and energy costs, rose to 2.8 percent in January from 2.4 percent the previous month, marking an 18-month high. Headline inflation climbed to 2 percent, ending a 10-month streak of readings below the official 2–4 percent target range.
Chanco noted that the sharp increase in core inflation makes a 50-basis point rate cut less likely, despite the weak economic growth in the fourth quarter.
Since beginning its easing cycle in August 2024, the central bank has lowered the benchmark policy rate by 2 percentage points to 4.5 percent. BSP Governor Eli Remolona Jr. said the bank remains ready to adjust rates if it helps stimulate demand, especially after the economy grew only 3 percent in the last quarter of 2025.
Full-year growth for 2025 averaged 4.4 percent, below the government’s target of 5.5–6.5 percent. Analysts attributed the slowdown to climate disruptions and the Marcos administration’s anticorruption measures, which reduced government spending and affected business and consumer confidence.
The BSP said its rate-cut cycle is approaching its end, with any further reductions expected to be modest and guided by upcoming economic data. Some economists project the central bank may still trim rates by a total of 50 basis points this year, bringing the benchmark rate down to 4 percent by the end of 2026.