ING’s Deepali Bhargava notes that the Bangko Sentral ng Pilipinas (BSP) delivered a widely expected 25bp rate cut to 4.25%, but paired it with more cautious and uncertain guidance as growth remains softer than expected. Elevated real rates, muted GDP prospects and weak confidence suggest further easing is possible, which is likely to keep the Philippine Peso weaker versus the US Dollar.
BSP cut and guidance pressure Peso
“The BSP lowered its target rate by 25bp to 4.25%, in line with both our expectations and the broader consensus. The tone of the decision was noticeably more uncertain, reflecting a softer‑than‑expected growth recovery. This shift led the BSP to remove language suggesting it was “nearing the end of easing,” resulting in a more neutral stance.”
“Looking ahead, further easing will depend heavily on how quickly confidence returns. Confidence is increasingly becoming a core driver of the BSP’s policy reaction function.”
“We recently trimmed our 2026 GDP growth forecast further to 5.2% with risks skewed to the downside. The latest 4Q data shows that soft government spending has become a more persistent drag, weighing not only on fiscal outlays but also on business and household confidence. We expect this pressure to persist at least through the first half of 2026, given ongoing investigations and unresolved political uncertainty that continue to dampen sentiment.”
“Against this backdrop of softer demand, elevated real rates, and lingering confidence issues, the door remains open for additional monetary easing. The risk of further monetary policy easing is likely to keep the peso weaker vs the US dollar.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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