Markets brace for possible BSP rate cut

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

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 rate (RRP) ahead of the Monetary Board’s meeting on 19 February.

“The next market focus would be the possible 0.25-percentage-point BSP rate cut on 19 February 2026, as the BSP reiterated that its monetary easing cycle is nearing its end, which 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 in part to the dovish tone from BSP Governor Eli Remolona Jr., who last week signaled that the door remains open for a February rate cut, depending on central bank data.

To date, the peso is trading at around P58.58 per US dollar, stronger than the record low close of P59.46 on 15 January.

Ricafort said the peso’s appreciation against the greenback, also driven by easing geopolitical tensions, has been a key catalyst for the PSEi’s rally at the start of 2026 — up by 337.99 points since the end of last year.