By Veronica Dudei Maia Khongwir
BENGALURU (Reuters) -The Philippine central bank is poised to cut its key interest rate by 25 basis points on Thursday to support economic growth, with subdued inflation giving it room to ease further, according to a Reuters poll of economists who expect at least one more reduction later this year.
Earlier this month, Governor Eli Remolona said a rate cut on August 28 was “quite likely”, reaffirming the Bangko Sentral ng Pilipinas’ (BSP) bias toward bolstering growth as inflation continues to cool.
Consumer prices rose just 0.9% in July, the slowest pace in nearly six years and well below the central bank’s 2%-4% target, giving BSP room to press ahead with an easing cycle it began a year ago.
Although second-quarter GDP growth accelerated to 5.5%, its fastest in a year, due to slowing inflation that lifted household spending, it only met the lower end of the government’s 5.5%-6.5% full-year target.
All 26 economists in the August 18–25 Reuters poll expected the BSP to trim its overnight borrowing rate by 25 basis points to 5.00% at its August 28 meeting.
“It’s largely just a continuation of where the policy stance is and basically to support growth,” said Lavanya Venkateswaran, senior ASEAN economist at OCBC.
“Despite having cut quite significantly over the past year, growth has not picked up very sharply, still hovering around the 5.5% handle, which means there is still some scope to bolster growth in the coming quarters.”
Nearly 82% of economists, 18 of 22 surveyed, predicted another 25-basis-point cut by year-end, bringing the policy rate to 4.75%, with some expecting the move as early as October. Two forecast rates to stay at 5.00%, while two others see a deeper 50-basis-point cut to 4.50%.
Median forecasts point to rates holding at 4.75% until at least the first quarter of 2026, though there is no clear consensus on where BSP’s easing cycle might ultimately end.
While the central bank balances price stability with growth, a 19% U.S. tariff on Philippine goods announced by U.S. President Donald Trump poses risks to the country’s exports.
“We expect BSP to maintain an accommodative stance for the foreseeable future. Our baseline scenario includes two additional 25-basis-point cuts this year, likely in August and October, bringing the policy rate to 4.75% by year-end,” said Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines.
“The global backdrop also favors easing as weak external demand and heightened trade uncertainty from U.S. tariffs weigh on exports.”
(Other stories from the August Reuters global economic poll)
(Reporting by Veronica Khongwir; Polling by Rahul Trivedi; Editing by Muralikumar Anantharaman)
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