BMI, a unit of Fitch Solutions, is expecting the Bangko Sentral ng Pilipinas (BSP) to further cut interest rates before the end of the year amid low inflation and slow growth.

“Low inflation and slow growth will keep Bangko Sentral ng Pilipinas on an easing path. We expect the BSP to cut the policy rate by 25 bps (basis points) to 4.50 percent by end-2025 and by another 50 bps to 4 percent by end-2026,” it said in a report released Friday.

During its meeting on Oct. 9, the BSP’s Monetary Board reduced policy rates by another 25 basis points, noting that inflation will remain within target range while growth outlook weakened.

The latest cut brings the BSP’s Target Reverse Repurchase (RRP) to 4.75 percent and the interest rates on the overnight deposit and lending facilities to 4.25 percent and 5.25 percent, respectively.

The BSP has so far reduced policy rates by a total of 175 basis points since last year.

“BSP had cut rates by 25 basis points against market expectations of a hold at its October meeting, stating that ‘the outlook for domestic economic growth has weakened,” BMI said.

“The central bank has ample room to ease as inflationary concerns subside. The latest headline inflation in September came in at 1.7 percent, marking the seventh consecutive month below BSP’s 2.0–4.0 percent target range.”

BMI projects headline inflation to average 1.6 percent this year.

According to BMI, the BSP is expected to continue with its easing cycle, reducing interest rates by a total of 50 basis points by the end of 2026.

It noted that inflation is likely to pick up in 2026 due to potential electricity rate adjustments and the likely reinstatement of higher tariffs on rice imports.

“As such, we forecast a higher average inflation of 3.5 percent for 2026, which remains within BSP’s target range. We also forecast GDP growth to slow to 5.2 percent in 2026, well short of the government’s 6-7 percent target. This will contain inflation, providing BSP the policy room to continue the easing cycle to stimulate the economy,” BMI said. (PNA)