BSP and Fed Preview: Expect twin cuts this month 

It’s that time of the year again. Both the US Federal Open Market Committee (FOMC) and the Bangko Sentral ng Pilipinas (BSP)’s Monetary Board are scheduled to convene their respective meetings this month.

Metrobank forecasts a 25-basis-point cut each from the Fed and the BSP, which will bring the target Federal Funds Rate (FFR) down to 4.00%-4.25% and the target Reverse Repurchase (RRP) rate to 5.25%.

Stalling jobs growth in focus

Some members of the FOMC have highlighted inflation concerns arising from tariffs, hinting at a less dovish stance, which could imply another wait-and-see decision. However, US Fed Chair Jerome Powell remains adamant on a data-driven approach, and the data point to a rate cut.

Jobs growth has been dismal in recent months, as revised numbers continue to settle below market expectations. This, as well as the overall bleak outlook for the US economy, commands support from the Fed, increasing the odds of a policy rate cut in this upcoming FOMC meeting.

Lower rice prices

Inflation decelerated further to 1.3% in May coming off the already cool 1.4% price growth logged in April. The latest print brings year-to-date inflation to 1.9%, below the lower bound of the BSP’s target range of 2%-4%.

Limited tariff impacts due to numerous setbacks as well as lower rice prices supported the downtrend to inflation despite upside pressure from goods such as meats.

BSP Governor Eli Remolona Jr. cited the softer inflation numbers as an indication that the central bank has room to cut rates two more times. However, given that this statement was made before the release of the May inflation report, sustained low inflation could strengthen the case for more than two cuts for the remainder of the year.

Close, but not quite

The most recent growth number of 5.4% for the first quarter of 2025 continues a streak of sub-target growth numbers for the Philippine economy.

Tariff uncertainty weighed down GDP as weaker net exports and capital formation offset relatively strong household expenditure.

Although BSP Governor Remolona already expressed the need for caution when it comes to easing, growth remaining below target only adds to the case for further support from the BSP.

(Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses.)

MARIA KAILA BALITE is a Research Officer of the Research and Market Strategy Department, Institutional Investors Coverage Division, Financial Markets Sector, at Metrobank. She holds a Master’s degree in Applied Economics and also majored in Financial Economics for her Bachelor’s degree, both from De La Salle University Manila. Outside of work, her interests include thriller movies, K-dramas, and dogs.


YOSHITAKA HIRAKAWA is a Research Officer of the Research and Market Strategy Department, Institutional Investors Coverage Division, Financial Markets Sector, at Metrobank. He holds a Bachelor’s in Management Engineering from Ateneo de Manila University. With a background in data-driven decision making and quantitative methods, he aims to provide meaningful insights. Hungry for adventure, he constantly seeks new sights, sounds and experiences, from cliff jumping to trying new cuisines.