BSP seen to remain dovish after anticipated December rate cut

The Bangko Sentral ng Pilipinas (BSP) is likely to maintain its dovish stance even after the expected rate cut in December to support the country’s economic growth, according to the Metropolitan Bank & Trust Co. (Metrobank).

“The Monetary Board of the BSP is seen to remain dovish following the expected rate cut in December even as inflation is expected to trend close to 4% by mid-2026,” Metrobank said in a commentary, citing its chief economist and markets strategist Nicholas Mapa.

Mapa said he expects inflation to pick up in 2026 and approach the higher end of the central bank’s target range of 2.0% to 4.0% by the middle of next year, due mainly to base effects and the potential increases in global commodity prices amid the tariffs imposed by the United States.

The Monetary Board cut rates by 25 basis points each in October, August, April, and June. The next meeting is scheduled on December 12, to discuss whether or not a change in rates is warranted given the current conditions.

“With the price stability mandate still within reach, BSP will likely stay focused on supporting sagging growth momentum,” Metrobank said.

For his part, BSP governor Eli Remolona hinted at further easing of policy rates in December, as he said a cut is possible for the last policy meeting for 2025, following the weak economic growth recorded in the third quarter.

“I would say it’s possible. Pwede naman (It can be),” he told reporters at the sidelines of an event at the BSP headquarters in Manila, adding that the central bank will continue to take “baby steps.”

This comes as economic growth stood at 4.0% in the third quarter, slower than the 5.5% in the previous quarter, and the weakest since the 4.3% growth in the second quarter of 2022.

Remolona said the growth figures for both the third quarter of 2024 and 2025 should be adjusted, as last year’s figure was “overestimated” to account for investments that did not push through.

“Kailangan i-adjust ng konti ng pababa, so ‘yung 4% ng 2025, tataas ng konti ‘yun, pero mababa pa rin (It needs to be adjusted slightly lower, so the 4% of 2025 will increase slightly, but it will still be low),” he said.

“We have to figure out whether the slowdown is from the demand side or the supply side. Kung supply side, wala kaming magagawa (If it is on the supply side, we cannot do anything). So how much is demand, normally magkasama ‘yun eh (they go together), so we have to figure out how much is demand, how much is supply,” he added.

Remolona said further reductions in the reserve requirement ratio – the percentage of cash from deposits banks need to keep on hand – are also being studied, taking into account the liquidity in the system.

“Inaayos pa ‘yung liquidity sa system, kung gaano karami. Kung sobra sobra, kasi ‘pag binaba mo ‘yung reserve requirement, dadami pa ‘yung liquidity,” he explained.

(The liquidity in the system is still being fixed, how much. If it is excessive and you lower the reserve requirement, it will increase even further.) — JMA, GMA Integrated News