Local investors are awaiting a potential rate cut by the Bangko Sentral ng Pilipinas (BSP) ahead of the trading week, according to Rizal Commercial Banking Corporation (RCBC) Chief Economist Michael Ricafort.

In an advisory, Ricafort said both the local bourse and the foreign exchange market are anticipating a successive BSP cut in its target reverse repurchase (RRP) rate ahead of the Monetary Board’s meeting on February 19.

“The next market focus would be the possible 0.25-percentage-point BSP rate cut on 19 February 2026, as the BSP has reiterated that its monetary easing cycle is nearing its end. This has recently led to a lower and more stable US dollar–Philippine peso exchange rate,” he said.

The RRP is the BSP’s primary policy tool for managing interest rates and liquidity in the financial system. When banks have excess cash, they may park these funds with the BSP overnight or for short tenors through the RRP facility, earning interest at the prevailing RRP rate. This rate serves as the benchmark policy interest rate in the Philippines.

By adjusting the RRP, the BSP influences borrowing costs, liquidity conditions, and overall economic activity. A lower RRP reduces borrowing costs, encouraging investment and consumer spending—key drivers of growth in an economy heavily reliant on consumption.

Ricafort attributed the peso’s recent strengthening partly to the dovish tone of BSP Governor Eli M. Remolona Jr., who last week signaled that the door remains open for a February rate cut, depending on incoming data.

As of press time, the peso was trading at around P58.58 per US dollar, stronger than its record low close of P59.46 on 15 January. Ricafort said the peso’s appreciation against the greenback, also supported by easing geopolitical tensions, has been a key catalyst for the Philippine Stock Exchange index’s rally at the start of 2026, which is up 337.99 points from end-2025 levels.

“For the week, the PSEi rebounded after declining for two straight weeks, gaining 61.94 points or 1 percent, compared with the previous week’s slight decline of 4.29 points or 0.1 percent,” Ricafort said.

He noted, however, that foreign investors pulled back week on week, with $22.7 million in foreign inflows recorded from 2 to 6 February, down from $127.2 million the previous week—indicating some investor caution ahead of the BSP’s potential rate cut.

Ricafort added that the PSEi, which closed at 6,390.91 on Friday, 6 February, is expected to test the 6,400 to 6,500 levels as investor confidence gradually recovers from last year’s widespread pessimism linked to corruption issues hounding the Marcos Jr. administration.

He also pointed out that the Dow Jones Industrial Average recently closed above 50,000 for the first time, alongside gains in the S&P 500 and the Nasdaq Composite—developments he described as “positive for the peso, PSEi, and local financial markets,” reflecting improved US and global risk appetite.

Following the release of January inflation data showing a 2.0 percent rate—within the BSP’s forecast range, Ricafort earlier said he believed a rate cut was “a foregone conclusion,” citing subdued inflation and weak gross domestic product growth.

“The slower economic growth has made it more certain that rates will be cut. That’s what the government needs now. That’s what the country needs now—lower rates and support measures,” he said on the DAILY TRIBUNE program Straight Talk.

He added in a message to DAILY TRIBUNE that “still benign inflation and relatively weaker local GDP growth data have somewhat increased the odds of a 0.25-percentage-point BSP rate cut at the next policy meeting.”