BSP may cut despite Fed hold as growth disappoints

The Bangko Sentral ng Pilipinas (BSP) may deliver a sixth straight cut in February, despite the US Federal Reserve’s decision to stand pat, amid weaker-than-expected Philippine economic growth in the fourth quarter, analysts said.

“Despite the Fed standing pat, we believe BSP will be looking to domestic developments (such as) low inflation and disappointing GDP (gross domestic product) to make its call,” Metropolitan Bank & Trust Co. (Metrobank) Chief Economist Nicholas Antonio T. Mapa told BusinessWorld in a Viber message.

On Wednesday, the Fed held its benchmark rates steady at the 3.5%-3.75% range, maintaining its total cuts since September 2024 at 175 basis points (bps).

The BSP’s key policy rate stands at an over three-year low of 4.5%, bringing its interest rate differential with the Fed to 75 bps.

The Monetary Board has so far lowered benchmark borrowing costs by a cumulative 200 bps since it began its easing cycle in August 2024.

BSP Governor Eli M. Remolona, Jr. said last week that the Fed’s moves are only one of the many data points they are considering in their monetary policy decision. He added that they are now uncertain about delivering one more cut under the current easing cycle, even with a weak economy and benign inflation.

Philippine economic growth slumped to a five-year low of 3% in the fourth quarter of 2025, bringing the full-year print to 4.4%. This was below the government’s 5.5%-6.5% target for the year, as well as the BSP’s 3.8% forecast for the fourth quarter and 4.6% for the entire year.

This, Mr. Mapa said, raises the odds of deeper easing by the Monetary Board, especially as inflation remains muted.

“The disappointing (fourth-quarter) print bolsters the case for additional easing from BSP while inflation remains subdued,” he said. “(The) window for BSP to provide accommodation remains open for the time being with monetary authorities likely opting to frontload cuts while the inflation objective is still in hand.”

Metrobank sees the BSP delivering a total of 50 bps in cuts this year to bring the key interest rate to 4% by yearend.

On the other hand, John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said the central bank may opt to preserve easing space at its first meeting this year as the peso remains “sensitive.”

“A possible move for the BSP is a pause with a bias to cut later if inflation stays benign and growth remains soft,” he told BusinessWorld via Viber. “It helps keep the Philippine peso and inflation expectations better-anchored, especially with the currency still sensitive, while preserving easing space.”

The peso marked a new all-time low of P59.46 against the dollar on Jan. 15.

On Thursday, the local unit lost 20.5 centavos to close at P58.945 versus the greenback from its P58.74 finish on Wednesday, Bankers Association of the Philippines data showed.

“Matching the Fed’s stand is generally healthier for the peso in the near term, while any further BSP cut should be framed as contingent on inflation staying within target and on clearer evidence that demand is weakening enough to warrant added support,” Mr. Rivera said.

The Monetary Board is set to hold its first policy review this year on Feb. 19. — Katherine K. Chan