Metro Manila, Philippines – Filipinos can expect cheaper borrowing costs for some time as the central bank has resumed its easing cycle and signaled more rate cuts to manage the possible negative impact of tariff policies from the United States, the country’s largest trading partner.
Thursday’s Monetary Board rate-setting meeting yielded a quarter-of-a-percentage point cut that brought the Bangko Sentral ng Pilipinas’ (BSP) overnight borrowing rate to 5.5%. The BSP has so far dialed down interest rates by 100 basis points since it reversed its tightening cycle last year.
“We contemplate further cuts this year. We’ll still do it in baby steps… 25 basis points at a time but I can’t tell you how many more times,” BSP Governor Eli Remolona told a press briefing after the Monetary Board meeting.
Slowing inflation – a near five-year low in March – has been giving the central bank “more degrees of freedom” not to put the brakes on its loose monetary policy just yet. Easy access to cash will depend on how wide is the scope for a soft landing, or a slowdown in the economy enough to skip a recession.
“We think we would have completed the easing cycle in 2025. That’s when we’re seeing a soft landing. Possible risk is that we begin to see a hard landing and then we’ll have to cut by more than 25 basis points,” Remolona said.
Central bank official rhetoric pointed to a monetary policy era that they said is “still slightly restrictive” as the economy is not yet fully taking off.
“We’re still below capacity,” Zeno Ronald R. Abenoja, BSP assistant governor of the Monetary Policy sub-sector, told reporters, adding that means “more room to cut” to boost the economy without triggering inflation.
The threat to economic activity is emanating from US President Donald Trump’s sweeping reciprocal tariffs which were temporarily suspended just hours after they took effect. That uncertainty in US trade policy is keeping investors and policymakers on edge.
“The impact on growth is a new thing. It’s a new thing,” Remolona said.
“Like the rest of the world, we’re looking at slower growth. But unlike the rest of the world, we’re looking at lower inflation. The rest of the world is looking at higher inflation,” the BSP chief added.
UK-based think tank Capital Economics is optimistic.
“With inflation set to remain under control, we think the central bank will loosen policy further over the coming months and by a bit more than most analysts expect,” it said in a research note released a few minutes after the central bank rate cut announcement.
“Our view is for 75 bps (basis points) of further easing in 2025, which is more dovish than that of the consensus,” it added.
