BSP Preview: The rate-cut barometer  

The barometer for policy rate cuts is moving.

Recent data releases point toward Philippine monetary authorities reducing the reverse repurchase (RRP) rate by a quarter point to 5.50% next week, a move now widely expected by the market. Now, focus turns to hints to how further they can go with the monetary easing cycle.

Target consistent

Despite supply-side pressure from last year’s typhoons, the African Swine Fever, and geopolitical tensions, inflation in the past two months was steady at 2.9% on a year-on-year basis. That’s within the Bangko Sentral ng Pilipinas (BSP)’s 2% to 4% target.

The current inflation outlook provides enough room for higher demand-side pressure on inflation should the BSP continue with its easing cycle.

Scope to ease further

BSP Governor Eli Remolona highlighted that the economy faces a “negative output gap,” a situation where the economy is growing below its potential, which may be a signal of weak demand despite low inflation.

Latest data showed that the economy expanded steadily in the past two years at a moderate 5.6% pace – below the government’s growth target. This may provide the BSP with the urgency to continue with its easing cycle.

Measured pace of easing

Although policy rates remain at elevated levels, and the BSP is expected to continue easing monetary conditions, recent sentiments from Remolona signal a moderation in the pace of future reductions.

The governor was quoted as saying that a reduction of 75 basis points (bps) this year “might be too much,” and that 25-bp cuts in each half of the year would be optimal to account for policy uncertainties.

Finance Secretary and Monetary Board (MB) member Ralph Recto’s recent statements also aligned with expectations of a total 50-bp cut in 2025, a downgrade from his previous view for 75-bp worth of cuts this year.

Our call

As the February 13 MB meeting approaches, the BSP governor confirmed that a rate cut is “still on the table.” Metrobank shares this view. We expect the BSP to deliver a 25-bp cut, narrowing the interest rate differential with the US policy rate to 100 bps.

(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.) 

MARIAN MONETTE FLORENDO is a Research Officer of the Research and Market Strategy Department, Institutional Investors Coverage Division, Financial Markets Sector, at Metrobank. Her academic background is in Mathematics and Economics. She loves solving puzzles and watching mystery movies.



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.