BSP seen more dovish amid global uncertainty

MOUNTING risks to economic growth from global trade tensions could prompt the Bangko Sentral ng Pilipinas (BSP) to implement more policy rate cuts than expected, Capital Economics said.

“With inflation set to remain under control, we think the central bank will loosen policy further over the coming months and by a bit more than most analysts expect,” the consultancy said in an April 10 note.

After the BSP's policymaking Monetary Board resumed easing this month via a 25-basis-point cut, Capital Economics said “our view is for 75 bps (basis points) of further easing in 2025, which is more dovish than that of the consensus.”

Many analysts have penciled in cuts totaling 50 bps this year, possibly as much as 75 bps, amid uncertainties over inflation and economic growth.

BSP Governor Eli Remolona Jr. has said that further reductions were likely, but would be done in baby steps and probably not during successive Monetary Board policy meetings.

Fitch unit BMI Country Risk & Industry Research on Monday, however, said another 25 bps cut could be ordered during the next policy meeting in June. The Monetary Board is scheduled to conduct three more policy meetings after that, in August, October and December.

Capital Economics said the downside risks to economic growth had increased on the back of US trade policy, which justifies a shift toward a more “accommodative” monetary policy stance.

While US President Donald Trump has announced a 90-day suspension of reciprocal tariffs — the Philippines was slapped a 17-percent duty — the continued implementation of a 10-percent base rate and slower growth in key trade partners such as the US and China could still dampen the country's export performance.

Remolona has pointed out that the BSP had plenty of room to ease, Capital Economics noted, given reduced inflationary pressures. The consumer price growth of 1.8 percent in March, in particular, fell below the central bank's 2- to 4-percent target range.

“We expect a combination of easing food price inflation and lower transport price inflation to keep inflation contained over the coming months, it said.

“As a result, we think that policymakers will cut interest rates further this year.”

During this month's policy meeting, the Monetary Board lowered its risk-adjusted forecast for 2025 to 2.3 percent from 3.5 percent. That for 2026 was also trimmed to 3.3 percent from 3.7 percent.

The outlook for 2027 was set at 3.3 percent, and the BSP said that inflation expectations “also remain within target.”