One Week Term Depot of Bangko Sentral ng Pilipinas (BSP)received a lower average rate than Weak growth data amid strong demand on Wednesday strengthened the case for further monetary easing.
Total bids for the central bank's seven-day term deposit facility (TDF) reached P121.841 billion, higher than the P110 billion auctioned a week ago and the P106.037 billion in tenders for the same offer volume.
This took the bid-to-cover ratio to 1.1076 times, higher than the 0.9640 ratio recorded last week.
However, BSP accepted bids of only P107.441 billion for one week's worth of papers under the program as it sought to keep the average yield low.
Yields on accepted tenders ranged from 4.45% to 4.5185%, slightly higher than the 4.45% to 4.5125% band in the previous auction. This took the average acceptance rate to 4.4967%, down 0.06 basis points (bp) from 4.4973% last week.
Rizal Commercial Banking Corporation Chief Economist Michael L. “The seven-day BSP TDF average auction yield was again slightly lower… following relatively weak local GDP growth data, which somewhat raised the possibility of a 25-bp BSP rate cut at the next BSP rate-setting meeting on February 19,” Ricafort said in a Viber message.
He said expectations of mild inflation in January also support the prospects of a dovish stance.
Philippine gross domestic product (GDP) grew 3% in the fourth quarter, slower than the 5.3% mark in the same period a year earlier and a revised 3.9% print in the third quarter, the government reported last week.
This was the slowest quarterly print in nearly five years, or since a 3.8% contraction in the first quarter of 2021. Outside of the coronavirus pandemic, this was the economy's worst performance since the 1.8% growth recorded in the fourth quarter of 2009, or during the global financial crisis.
This brings the GDP growth rate for full year 2025 to 4.4%, which is lower than the government's target of 5.5%-6.5%. That was slower than 2024's 5.7% and the weakest annual expansion since 3.9% in 2011, with a calculated 9.5% contraction in 2020 due to the pandemic.
Officials said growth continued to decline due to a decline in public spending and weak investor confidence due to the flood control scandal.
BSP Governor Eli M. Remolona, Jr. said on Sunday that a rate cut is possible at the Monetary Board's February 19 policy review if the fourth-quarter GDP slowdown proves to be demand-driven.
“If we can help the demand side and still keep inflation low, then certainly we will help,” he said.
He said they would continue to assess the available data and take decisions “one meeting at a time.”
The Monetary Board has cut the benchmark borrowing costs by 200 bps from August 2024, taking the policy rate to 4.5%.
Analysts said weak economic prospects and manageable inflation give the BSP scope for one to two more cuts this year to end its current easing cycle.
A businessworld The survey of 18 economists yielded an average forecast of 1.8% for the January consumer price index, which was within the BSP's 1.4% to 2.2% estimate for the month. This means inflation will be unchanged from December and slower than 2.9% a year ago.
11th January will also be celebratedth Inflation remained below the BSP's 2% to 4% target for consecutive months.
The Philippine Statistics Authority is set to release January inflation data on Thursday (February 5).
The central bank uses TDF and BSP bills to liquidate excess liquidity in the financial system and better guide market rates towards the policy rate.
It last auctioned both seven-day and 14-day deposits on October 29. It has not offered 28-day fixed deposits for more than five years to give way to its weekly offering of securities with similar tenure.
Based on the BSP's latest monetary policy report, its market operations have absorbed P1.5 trillion in liquidity by mid-November 2025, of which 5.4% has been withdrawn through the fixed deposit facility. — Katherine K. chan