BSP seen to continue cutting rates as inflation eases

The Bangko Sentral ng Pilipinas (BSP) is expected to deliver more policy rate cuts in the second half of 2025 as easing inflation gives monetary authorities more room to support economic growth, BMI, a unit of Fitch Solutions, said in a report released Thursday.

BMI projected the BSP’s benchmark policy rate to settle at 4.75 percent by yearend, citing the combination of subdued inflation and slower growth. Headline inflation dropped to a nine-year low of 0.9 percent in July, prompting the firm to revise its full-year forecast to 1.6 percent, down from an earlier 2.2 percent estimate.

Economic growth remains tepid, with gross domestic product expanding by 5.4 percent in the first quarter and 5.5 percent in the second quarter.

"We expect the Bangko Sentral ng Pilipinas (BSP) to maintain a pro-growth policy stance in H2 2025 amid growing economic uncertainty," BMI said.

Despite the anticipated rate cuts, BMI said the peso is likely to strengthen slightly against the US dollar, ending the year firmer than its current spot rate of P57.22 per $1. The research unit noted that “there remains the risk that investor confidence in the US dollar may weaken further” as developments in the United States weigh on the greenback.