Monthly Recap: Monetary easing isn’t over 

This month, policymakers decided to take their time in lowering policy rates.

Following the Federal Reserve (Fed)’s halt on rate cuts, the Bangko Sentral ng Pilipinas (BSP) also hit the pause button, opting to wait-and-see the impact of proposed global policies – particularly on trade.

Still, the BSP’s easing cycle continues. It later announced it will lower banks’ reserve requirement ratio while keeping the door open for measured rate reductions.

Looking back 

• Philippine annual headline inflation held steady in January from a month earlier, with rice prices expected to remain subdued. Still, a strong-dollar story that weakens the peso could stoke costs of imported goods.
• The USD/PHP spot remained volatile. Last month, the currency market was chiefly moved by tariff talks.
• Following the Fed’s cue, the BSP also took a pause on rate cuts. Although the BSP maintained that they remain on an easing mode and later announced it will cut the ratio of funds that banks are required to hold in reserves.

Moving forward 

• We forecast the Fed to cut its policy rate by a total of 50 basis points (bps) in 2025, with an additional 25 bps cut later in the year should inflation and labor conditions remain favorable.
• For the BSP, we see a cumulative 50 bps worth of rate cuts for this year. Another 25-bps reduction toward the end of the year is possible should price pressure continue to ease.
• We expect the Philippine economy to grow by 5.8% year-on-year and inflation to average at 3.4% in 2025.

(Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses.)   

Economic Updates   

Monthly Economic Update: Somewhat less dovish

BSP still on easing path, looking to get timing right

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