Analysts expect 25 basis-point rate cut this week

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The Philippine Star

December 8, 2025 | 12:00am

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is widely expected to deliver another 25-basis-point (bp) rate cut this week, with economists citing subdued inflation, sluggish growth and soft domestic demand as key drivers for further easing.

BPI lead economist Jun Neri said with November inflation remaining below the two percent target, the central bank has room to cut its policy rates further in the coming months.

“We expect a 25-bp cut in the BSP’s policy meeting this week, consistent with the recent signals from the central bank,” Neri said in a note.

He added that a gradual easing path could bring the policy rate down to four percent by 2026, although overly aggressive cuts may prompt abrupt reversals if inflation unexpectedly spikes.

Inflation eased to 1.5 percent in November from 1.7 percent in October, undershooting market expectations. Core inflation likewise slipped to 2.4 percent from 2.5 percent, bringing year-to-date inflation to 1.6 percent and core inflation to 2.4 percent.

Looking ahead, Neri noted that inflation may rise but should remain within manageable levels in the first half of 2026 in the absence of major supply shocks.

He cited potential downside pressure on global oil prices as producers ramp up output, as well as slower gross domestic product (GDP) growth due to weak infrastructure spending that could temper demand-driven inflation.

However, he warned that fading base effects from rice, geopolitical tensions and peso depreciation tied to foreign outflows pose upside risks.

Other economists echoed expectations of a 25-bp reduction on Dec. 11.

Security Bank research head and chief economist Angelo Taningco said he expects the policy rate to be lowered to 4.5 percent from the current 4.75 percent.

“I expect the BSP to cut the policy rate by 25 basis points to 4.5 percent. Factors considered for a rate cut include tepid GDP growth and benign inflation,” Taningco said, adding that the bank forecasts full-year inflation at 1.7 percent.

UnionBank chief economist Carlo Asuncion said inflation remaining well below the two to four percent target and weakening growth momentum support a rate cut.

“This move would help support domestic demand while global easing trends reduce pressure on the peso. For 2025, we see full-year inflation averaging around 1.6 percent, reflecting subdued food and energy prices and soft demand-side pressures.”

Metrobank analysts Marian Florendo and Yoshitaka Hirakawa said they expect the BSP to match the US Federal Reserve’s anticipated 25-bp cut this week, keeping the interest rate differential steady at 75 bps.

They noted that maintaining this spread “may mitigate further pressure on the peso amid an already elevated forex spot rate which currently hovers around the higher end of the 58 level, and grazing the 59 level.”

They added that the BSP’s October rate cut was intended to pre-emptively counter sluggish growth, a concern that may again influence policymakers. Third-quarter GDP growth slowed to four percent, weighed down by weak government spending and a softening in household consumption.

Dutch financial giant ING likewise expects a 25-bp cut, citing rising concerns that muted public expenditure could become a longer-term drag.

The bank lowered its full-year growth forecast to 4.7 percent from 5.2 percent, saying that while agriculture and consumption may rebound in the fourth quarter, investment and government spending will likely stay subdued.

“This strengthens our call for a 25-bp rate cut by the BSP on Thursday,” ING said.

The BSP will hold its policy meeting on Dec. 11, its last for the year, as it weighs the need to support a cooling economy while guarding against potential inflation risks.