Banco Central NG piliPinas (BSP) is expected to cut its key policy rate by 25-basis-point (bp) at its first meeting this year, which analysts say could mark the end of its current easing cycle.
“We expect the BSP Monetary Board to cut the 25-bp rate at its Feb. 19 meeting, which is in line with recent guidance that some limited room remains for policy easing,” Azril Rosli, economist at Maybank Investment Banking Group, said in an e-mail. “However, there is no longer room for major steps.”
Mr Rosli said a 50-bp cut would be unlikely given the rise in inflation in January despite the slowdown in the Philippine economy. In the last quarter of last year.
“On the one hand, the inflation trajectory is becoming less benign, with both headline and core measures moving higher, narrowing the room for further easing and making aggressive cutbacks difficult to justify, especially as strong core inflation points to underlying price pressures,” he said.
In January, headline inflation rose to nearly 2% in December from 1.8% in December, but eased from 2.9% a year earlier.
It was the first time in almost a year that inflation reached the central bank's 2%-4% target.
Meanwhile, core inflation, which excludes volatile food and fuel prices, rose to 2.8% last month, from 2.4% in December and 2.6% last year.
Mr Rosalie said this would bring the monetary board near the end of its easy path.
“It is more likely that the February move may be the final or near-final calibration rather than the beginning of a fresh easing phase,” he said.
A businessworld The survey conducted last week showed that all 16 analysts surveyed expect the monetary board to reduce the target reverse repurchase rate by 25 bps to 4.25% on February 19.
DBS chief economist Taimur Baig and senior economist Radhika Rao said recent disappointing growth would solidify a sixth consecutive rate cut on Thursday.
“The soft stance for February (Q4 2025) is likely to be further strengthened by disappointing growth data, where the headline slowdown slowed to 3% year-on-year, a five-year low,” he said in a report.
Philippine gross domestic product (GDP) expanded 3% in the fourth quarter, bringing full-year growth to a post-pandemic low of 4.4% through 2025, as governance concerns amid a flood control dispute dampened investment and spending.
Nicolas Antonio T. Mapa, chief economist at Metropolitan Bank & Trust Co., said Thursday's rate cut would soon provide a much-needed boost to the economy, given the delayed impact of monetary policy easing.
“A lack of private sector investment as well as a weary consumer is putting pressure on growth since (COVID-19) reopenings,” Mr Mapa said in a Viber message. “Both could have used the shot in the arm provided by the air cover of the BSP cut.”
“Outside of core domestic spending, boosting private sector investment to unlock new sources of growth still remains the missing link,” he said.
Domestic consumption growth slowed to 3.8% in the fourth quarter, down from 4.7% a year earlier and 4.1% in the third quarter.
Meanwhile, investment declined by 10.9%, which reverses from a 5.5% increase over the same period in 2024 and is sharper than the -2.8% decline in the third quarter.
Hannah Liu, research analyst at Nomura Global Markets Research, also expects a quarter-point cut on Thursday, although she sees a 35% chance of the BSP remaining stable.
The Monetary Board will also likely maintain its less accommodative stance after Thursday's 25-bp rate cut, he said, adding that upcoming economic data will guide the BSP's policy path going forward.
“We expect the BSP's monetary board meeting to be similar to its December meeting, when it became less calm and emphasized that the end of its easing cycle is near after the substantial rate cuts made so far,” Ms Liu said in a report.
“Nevertheless, in our view, the BSP will continue to indicate data dependence, given the high uncertainty of the extent of pressure on the economy from the corruption scandal and spillover effects,” he said.
The central bank has reduced borrowing costs by a cumulative 200 bps so far, from August 2024, bringing the benchmark rate down to 4.5% from 6.5%.
BSP Governor Eli M. Remolona, Jr. had earlier left the door open to further easing to help boost domestic demand.
However, he said current economic data has reduced his comfort zone, adding that business confidence is beginning to recover.
For Mr Rosselli, another rate cut after February would only be possible if inflation remains low and growth remains sluggish.
“Additional cuts after February are conditional rather than assured,” he said. “A final 25-bp cut later in 2026 is only possible if the pace of inflation moderates markedly and growth continues to underperform.”
There will be six policy meetings of the Monetary Board this year, the first of which will be held on February 19. The remaining meetings will be held on 23 April, 18 June, 27 August, 22 October and 17 December. Katherine K. chan