BSP Preview: Supporting growth in a pinch

A tepid economy will be a decisive factor in the central bank’s next monetary policy meeting.

Metrobank expects the Bangko Sentral ng Pilipinas (BSP) to reduce borrowing costs by 25 basis points (bps) next week to help fuel economic growth.

Recovery in sight

Gross domestic product (GDP) growth surprised on the downside in the fourth quarter of 2025, as household expenditure and private investment continued to stumble.

Economic growth slowed to 3.0% last quarter, bringing the full-year number to 4.4%, below the government’s 5.5%-6.5% target.

While the economy is seen expanding at a stronger clip in the second half of 2026, ailing household expenditure provides a nudge for BSP to cut policy rates.

Price rise

Metrobank sees consumer price increases accelerating past the lower end of the BSP’s 3±1% target range this year.

Inflation quickened to 2.0% in January from 1.8% in December, largely driven by higher prices of utilities despite slower food inflation.

Faster price growth in 2026 will be driven by a low base from last year, which may be offset by the resumption of rice imports. As such, inflation will remain firmly within the central bank’s target, leaving space to cut policy rates.

Our call

Metrobank expects the BSP to cut the key policy rate by 25 bps to 4.25% next week. This reduction narrows the difference between the Philippine and US policy rates to 50 bps.

Despite the narrower interest rate differential, the BSP’s view on consumer and businesses confidence may prove to be the bigger driver of currency movements.

Read: The view of fewer Fed cuts and the peso’s move

Further easing in April may remain in the cards if inflation remains subdued. However, faster inflation from higher rental and utility prices could eat away at any space the BSP has left, potentially closing the door on further reductions to the policy rate.

(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.)  

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.