The Bangko Sentral ng Pilipinas (BSP) is expected to implement more policy rate cuts until 2026 as inflation remains within target, according to BMI, a unit of Fitch Solutions.
In a report released Monday, BMI projected the BSP to keep rates steady during its October meeting but deliver a 25-basis-point (bps) cut in December.
“While a sharp fall in rice prices drove headline inflation down from 1.4 percent y-o-y in June to 0.9 percent in July, we expect near-term price pressures from the rice import ban—slated to begin in September for two months—and higher electricity prices,” BMI said.
BMI noted that BSP Governor Eli Remolona signaled another 25bps cut before the end of 2025 but hinted at a pause in October, describing the economy as being in a “sweet spot.”
The report said easing inflationary pressures toward late 2025 would give the BSP room to further lower rates. Inflation is expected to average 1.6% this year, well within the government’s 2% to 4% target range.
For 2026, BMI forecasts another 50bps rate cut, bringing the policy rate to 4.25%. Economic growth is projected to reach 5.2% that year, indicating a greater need to stimulate the economy.
BMI also expects the peso to slightly weaken from an average of PHP58.00 per USD in 2025 to PHP58.50 per USD in 2026, helping shield the economy from import-driven inflation. It sees inflation averaging 2.5% in 2026, still within BSP’s target range.
However, BMI warned that a further escalation of global tariff wars could dampen consumer and investor sentiment. “If such a scenario materializes with inflation expectations remaining largely anchored, the BSP would prioritize the economy and implement larger policy rate cuts,” it said.
