Bangkok remote NG Pilipinas (BSP) is expected to further lower benchmark interest rates this year to support a fragile environment in the global environment as inflation continues to ease.
ING Bank believes BSP cuts borrowing costs by 75 basis points (bps) More, it said in a report.
“The inflation trajectory that exceeded the expected inflation trajectory, was stronger than expected local currencies, and the real interest rate was higher – coupled with uncertainty about global growth, all of which suggests a deeper reduction cycle,” said Ing Bank’s economics division.
“We now expect policy rates to reach 4.75% by the end of this year, which should include peso appreciation.”
Bank of America (BOFA) Global Research said in a separate report that it expects central banks to cut twice more in the coming months.
“We believe that BSP will reduce its balance by at least 50 bps in 2025, with the next cut Probably at the June 19 meeting. ”
“As the policy and growth prospects are cleared. The policy and growth prospects in the Philippines have been cleared, and the policy and growth prospects in the Philippines have recovered from slow bias. The growth of the Philippines’ GDP (Gross Domestic Product) continues to remain weak, and as oil and rice prices fall, inflation will remain low to allow further comfort release of BSP,” added BOFA Global Global Research. “The monetary policy stance is currently at a policy rate of 5.5%. It seems very limited now. ”
It expects the Philippines economy to grow by 5.5% this year and 5.6% in 2026, both of which are below the government’s 6-8% growth target over the years.
Philippines GDP grew 5.4% in the first quarter, slightly higher than the 5.3% growth in the previous three months, but slower than the 5.9% rate in the same quarter last year.
Rosemarie G. Edillon, deputy minister for the Ministry of Economics, Planning and Development, said GDP needs to be expanded by at least 6.2% in the remaining three quarters to reach 6% growth, which is the low end of the government’s 6-8% growth target – year-end.
Most central banks of Southeast Asian countries (ASEAN) regional associations have cut tax rates this quarter and have resumed a mitigation cycle after “uncertainty” earlier this year, BOFA Global Research said.
“We hope this dynamic will continue, as the relative stability of financial markets combined with some breathing stability provides a window of opportunity for ASEAN central banks to further reduce interest rates.”
Last month, the Monetary Commission cut the benchmark interest rate by 25 basis points, raising the policy rate to 5.5%, and officials considered the potential impact of the Trump administration’s shifting trade policy on the broad uncertainty of the Philippines economy after an unexpected pause in February.
BSP has now cut borrowing costs by 100 barrels since its easy cycle began last August.
Last week, BSP Governor Eli M. Remolona, Jr. It said the Monetary Commission could make two more cuts this year, and the next meeting next month would reduce the desktop as early as the first time.
The head of the BSP said cooling inflation gave them “enough space” to further ease policy stance, although they don’t want to cut “too much” as this could be repriced.
After the June 19 review, the remaining meetings of the Monetary Commission are scheduled to be held in August, October and December.
Meanwhile, ING said that the peso may weaken in the coming months as market risks arising from global trade developments may affect the economy, so in recent months, the peso may weaken again and gradually weaken again in the coming months.
“While the Philippines is largely a domestic demand-driven economy, tariffs and global trade slowdowns may impact export growth and the negative impact of BPO (business process outsourcing) business in 2025,” it said.
It added: “The balance of payments (BOP) weakness continues until the first quarter of 2025. Therefore, we expect PHP to show a mild depreciation bias.” “However, this view may be challenged by potential further dollar weaknesses, and BSP’s comments suggest that in this case, interventions are limited to curb peso intensity.”
The central bank earlier said it would generally avoid intervening in the foreign exchange market, and would only curb speculation in a “small amount” and maintain an orderly market if necessary.
The Peso has been trading at the P55 level this month at the P55 level after Mr. Trump returned to the global financial markets in January.
Last week, local units were in nearly two years highs as Moody’s rating lowered the U.S. triple credit rating but has since weakened.
The Peso ended Thursday with P55.73 against Greenback, down 25.5 in Wednesday’s game after a U.S. court ruling blocked tariffs on Mr. Trump’s majority “liberation day” with the deal, after most of the “liberation day” announced in April.
So far, the peso is still up from its P2.115 or 3.8% closing P57.845 at the end of 2024. – Luisa Maria Jacinta C. Jocson
