By: Aliahcorr Balanon, Sophia Pacheco
Photo courtesy: Business World File Photo
The Bangko Sentral ng Pilipinas (BSP) is expected to implement another interest rate reduction in the first quarter of 2026 on Aug. 28, 2025, aiming to sustain economic growth amid easing inflation.
“We think there’s potentially another cut in the first quarter, which is good for the economy,” Bank of the Philippine Islands President and CEO Jose Teodoro Limcaoco said on Wednesday.
According to a Reuters poll of 26 economists conducted Aug. 18-25, all respondents expect the BSP to cut its key interest rate by 25 basis points to 5.00%.
In July, consumer prices rose 0.9% marking its slowest pace in nearly six years and well below the BSP’s 2%-4% target range.
“It shows that the BSP has been doing its job correctly, inflation is under control, and they’re now doing this to continue to stimulate the economy,” Limcaoco added.
Second-quarter gross domestic product (GDP) growth rose to 5.5%, meeting the lower end of the government's 5.5%-6.5% full-year target range.
"Despite having cut quite significantly over the past year, growth has not picked up very sharply, still hovering around the 5.5% handle, which means there is still some scope to bolster growth in the coming quarters.” said Lavanya Venkateswaran, senior ASEAN economist
In 82% of economists surveyed, there are predicted another 25-basis-point cut by year-end that brings a policy rate of 4.75% where some are expecting the move as early as October. Additionally, two forecast rates to stay at 5.00% while two others see a deeper 50-basis-point cut to 4.50%.
Until the first quarter of 2026, there are median forecast points to rates holding 4.75% but there is no clear consensus on where BSP’s easing cycle might ultimately end.
BSP balances price stability with growth, however, a 19% US tariff on Philippine goods announced by the US President Donald Trump could risk the country’s exports.
"We expect BSP to maintain an accommodative stance for the foreseeable future. Our baseline scenario includes two additional 25-basis-point cuts this year, likely in August and October, bringing the policy rate to 4.75% by year-end," said Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines.
The BSP also announced on Wednesday that it will adopt a new format for releasing monetary policy decisions to enhance transparency and improve public understanding of its actions.