Monthly Recap: Rate cuts ahead for the Fed and BSP

We continue to see the US Fed (Fed) and the Bangko Sentral ng Pilipinas (BSP) taking the path toward rate cuts this year.

Key points

• The ADB and AMRO have revised their full year 2025 and 2026 growth forecasts for the Philippines, trimming their projections due to global economic uncertainties.
• Meanwhile, Finance Secretary Ralph Recto expects accelerated growth in the second half of 2025, fueled by government and household consumption, projecting a full-year GDP of 5.7-5.8%.
• The US Federal Reserve held its key interest rate at 4.25%-4.50% for the sixth consecutive time, with Chair Jerome Powell indicating no clear signals for future monetary policy.
• Philippine headline inflation edged up to 1.4% year-on-year in June, marking the first monthly acceleration since January.

What now?

• We have revised our 2025 GDP forecast for the Philippines to 5.5% from 5.7%. We expect economic growth to bounce back to 6.1% in 2026 and 6.0% in 2027.
• We have revised our full-year average inflation forecast for 2025 downward to 2.0%. We expect inflation to accelerate in 2026 and 2027 to 3.7% and 3.0% respectively.
• We see the US Federal Reserve implementing a cumulative 50 basis points (bps) of rate cuts in each in 2025 and 2026, bringing its target range to 3.25%-3.50% by the end of 2026. Similarly, we expect the Bangko Sentral ng Pilipinas (BSP) to cut its policy rate by an additional 50 bps this year and another 50 bps in 2026, bringing the target RRP to 4.25% by end-2026.

(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.)

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Monthly Economic Update: Two more BSP cuts  

The US Fed and the BSP are still expected to cut rates within the year

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