The Bangko Sentral ng Pilipinas (BSP) is expected to deliver another rate cut in December as growth risks deepen and business confidence weakens amid corruption concerns in public spending, according to economists.
Metropolitan Bank and Trust Co. chief economist Nicholas Mapa and DBS Bank senior economist Radhika Rao said the BSP might extend its easing cycle into early 2026 after last week’s surprise 25-basis-point reduction brought the benchmark policy rate to 4.75 percent, the lowest in three years.
Mapa said the BSP appears inclined to support moderating gross domestic product (GDP) growth as the economy continues to underperform.
‘It looks like the BSP is intent on supporting moderating growth momentum, with GDP now projected to slip below the government’s official growth aspiration for a third consecutive year,’ Mapa said.
Mapa described the latest move as a ‘quick (baby) step’ toward what BSP Governor Eli Remolona Jr. now considers the ‘Goldilocks’ rate of around four percent, lower than the previous five percent estimate.
‘Four is the new five,’ Mapa said. ‘With inflation expected to stay close to target through 2027, the BSP is taking advantage of this manageable inflation environment to address growth challenges.’
Mapa expects further easing in December and the first quarter of 2026, noting that the central bank remains ‘quick and nimble’ and will adjust policy based on evolving economic data.
DBS’s Rao said the BSP’s fourth consecutive rate cut marks a clear dovish shift, as policymakers grow increasingly cautious of weaker domestic demand and the impact of corruption allegations on business sentiment.
‘Policymakers are wary of downside risks to growth from a slowdown in infrastructure projects, private sector spending and real estate investments, besides the hit to confidence from corruption allegations in flood-control projects,’ Rao said.
Rao noted that the allegations, which have drawn scrutiny from lawmakers and involve several legislators and contractors, have likely dampened investor and business sentiment.
The peso weakened after the BSP’s surprise move, prompting speculation that foreign exchange intervention may be used to stabilize the currency.
Rao said a weaker peso could pose inflation risks, although inflation remains within the two to four percent target range.
‘The central bank’s dovish commentary, impending growth risks and a negative output gap suggest that the door remains open for another cut in December, which will take the rate to 4.50 percent,’ Rao said.
According to Rao, external conditions remain favorable, with the US Federal Reserve’s expected rate cuts likely preserving rate differentials and providing space for the BSP to ease further.