THE slower-than-expected inflation rate in September, international economists said, may not prompt the Bangko Sentral ng Pilipinas (BSP) to cut rates on Thursday.
However, these economists still believe the easing cycle will resume by December 2025 and continue until the first quarter of 2026.
In an economic brief, HSBC ASEAN economist Aris Dacanay said the BSP is still expected to continue reducing rates until it reaches a terminal rate of 4.5 percent in the first quarter of 2026.
‘Our base case is still for the BSP to cut its policy rate to as low as 4.5 percent by 1Q [first quarter] 2026, subject to rice prices being stable,’ Dacanay said.
He explained that the September inflation sets the stage for a 25-basis-point reduction in the fourth quarter to 4.75 percent. This is expected in December 2025 rather than this week.
‘Though, admittedly, the downside surprise in inflation increases the risk that the BSP frontloads its rate cut, we still think the central bank would like to see more data on growth and rice prices before deciding to continue its easing cycle,’ Dacanay said.
Citi Bank NA Manila Branch also said BSP is expected to deal in a 50-basis-point reduction in policy rates. This will be delivered in two 25-basis-point reductions in policy rates slated for December this year and the first quarter of 2026.
In its inflation statement, BSP said that while domestic demand held firm, there are expectations that the economy’s growth could be impacted by US trade policies.
Citi said growth concerns may also emerge due to cyclical headwinds as well as challenges to services employment.
‘With today’s lower-than-expected inflation print, real policy rates will remain somewhat above BSP’s neutral range of 1.5-2 percent in the absence of further cuts,’ Citi Bank said.
‘We continue to expect BSP to resume cuts in December as well as 1Q26 [first quarter 2026], bringing real policy rate firmly to the floor of the 1.5-2 percent neutral range in 2026,’ it added.
Earlier, the Philippine Statistics Authority (PSA) said the increase in inflation was due to the typhoons that battered various provinces and disrupted supply chains.
These disruptions are compounded by inefficiencies such as corruption, poor planning, and delays when it comes to infrastructure projects like roads and bridges.
‘When floods or typhoons hit, these inefficiencies amplify logistical bottlenecks, leading to higher transport and distribution costs, which then push up consumer prices, especially for food and essentials,’ Asuncion told this newspaper.
‘If the only bridge access, for example, to a certain municipality or city, fails because of corruption resulting [from] substandard construction, we immediately observe prices of food and essentials rise and even cause markets to fail,’ he added.
Further, Asuncion said the repair and reconstruction of projects that suffered from corruption, poor planning, and/or delays, would prolong the duration of elevated prices of goods and the cost of services.
Philippine Institute for Development Studies (PIDS) Research Fellow John Paolo R. Rivera told the BusinessMirror that faster inflation can be a real-world consequence of corruption in infrastructure projects.
When these funds are wasted on ghost projects, infrastructure facilities remain inadequate or unfinished. This leads to ‘disruptions in supply chains, higher logistics costs, and productivity losses especially during calamities or extreme weather events.’