Banks expect BSP to keep rates steady for now

Upgrade to High-Speed Internet for only ₱1499/month!

Enjoy up to 100 Mbps fiber broadband, perfect for browsing, streaming, and gaming.

Visit Suniway.ph to learn

February 22, 2026 | 12:00am

MANILA, Philippines — Banks expect the Bangko Sentral ng Pilipinas (BSP) to keep policy rates steady in the coming months, although there could be some room for one final rate cut as policymakers weigh weak growth against manageable inflation.

Global banking giant Citi said its base-case scenario is for an extended pause following the BSP’s 25-basis-point rate cut last week, but noted that a further rate cut in April remains a risk, depending on how quickly confidence in the economy improves.

“As expected, the BSP policy rate was cut in the February meeting. However, a dovish tilt was apparently added in the monetary policy statement,” Citi said. 

“Our base-case remains for an extended pause hereon, but the risk scenario of a further rate cut in April remains, depending on how quickly confidence recovers,” the bank added.

The BSP reduced its benchmark rate to 4.25 percent at its February meeting, bringing cumulative easing to 225 basis points since August 2024, as growth slowed and confidence weakened. 

The central bank has said inflation remains manageable, even after raising its 2026 forecast to 3.6 percent due to supply-side pressures.

Citi said policymakers appear comfortable with the inflation outlook despite the upward revision, noting that supply-side factors were behind the adjustment and that inflation is still expected to move closer to the three percent target by 2027.

It also noted that monetary policy operates with a long lag and officials will likely weigh the benefits of further easing against the risk of de-anchoring inflation expectations.

Citi expects gross domestic product (GDP) growth to gradually recover to the 3.5 to four percent range in the first half as public investment restarts, although delays related to governance reforms could temper the rebound.

Still, an additional rate cut on April 23 remains part of Citi’s risk scenario after the BSP dropped language in its statement suggesting the easing cycle was nearing its end.

In a separate note, the Metrobank Research and Market Strategy Department also said that further policy adjustments are increasingly tied to confidence trends. 

“Any further policy rate adjustments appear increasingly contingent not just on the inflation outlook but also on growth prospects,” Metrobank said.

The Ty-led bank said confidence is likely to remain subdued despite signs of optimism from efforts to improve budget allocation and reorganize infrastructure spending, adding that further monetary policy support may still be needed.

Given within-target inflation and sluggish growth, Metrobank maintained its forecast of one more rate cut, bringing the policy rate to four percent before the BSP holds steady in 2027. 

The bank said the central bank could opt for a preemptive move in April, ahead of the release of first-quarter GDP data, amid urgency to support growth.