Increasing risks to economic expansion due to worldwide trade strains might lead the Bangko Sentral ng Pilipinas (BSP) to execute more policy rate reductions than anticipated, according to Capital Economics.
The consulting firm stated in a memo dated April 10th that they believe the central bank will ease policies even more in the upcoming months due to controlled inflation, surpassing what many analysts anticipate.
Following the BSP’s policymaking Monetary Board restarting their easing measures with a 25-basis-point reduction earlier this month, Capital Economics stated, “we anticipate an additional 75 basis points of easing in 2025, positioning us slightly more accommodative compared to market expectations.”
A number of experts have anticipated reductions amounting to 50 basis points this year, potentially reaching up to 75 basis points, due to doubts surrounding inflation and economic expansion.
BSP Governor Eli Remolona Jr. stated that additional decreases might occur, albeit gradually and possibly not consecutively at various Monetary Board policy gatherings.
The Fitch subsidiary BMI Country Risk & Industry Research stated on Monday that an additional 25 basis points reduction might be mandated at the upcoming policy gathering in June. After this meeting, the Monetary Board plans to hold three further sessions in August, October, and December respectively.
Capital Economics stated that the negative factors threatening economic growth have intensified due to U.S. trade policies, supporting a move towards a more “accommodative” monetary policy approach.
Although U.S. President Donald Trump has imposed a 90-day pause on reciprocal tariffs — with the Philippines facing an 17 percent levy — the persistent application of a 10 percent baseline tariff along with sluggish economic expansion in major trading allies like the United States and China might still hinder the nation’s export success.
Remolona highlighted that the BSP had significant leeway for easing policies, as observed by Capital Economics, due to diminished inflationary pressures. Specifically, the 1.8 percent increase in consumer prices in March dropped beneath the central bank’s targeted range of 2 to 4 percent.
“It expects that a reduction in food price inflation along with decreased transport price inflation will help maintain controlled levels of inflation in the upcoming months,” the statement read.
Consequently, we believe that policymakers will reduce interest rates even more before the end of this year.
In this month’s policy gathering, the Monetary Board reduced its risk-adjusted projection for 2025 to 2.3 percent from 3.5 percent. The estimate for 2026 was likewise cut down to 3.3 percent from 3.7 percent.
The outlook for 2027 was set at 3.3 percent, and the BSP said that inflation expectations “also remain within target.”