Philippine central bank set for final 25-bps cut to 4.25% on February 19 - Reuters poll
BENGALURU, Feb 17 : The Philippine central bank will cut its key interest rate by 25 basis points to 4.25 per cent on Thursday and keep it there through 2026, a Reuters poll of economists found, as subdued inflation gives policymakers room for what could be a final move to support domestic growth.
Consumer inflation rose to 2.0 per cent in January, the fastest pace in 11 months, but remained at the lower end of the Bangko Sentral ng Pilipinas' (BSP) 2 per cent-4 per cent target range. With price pressures still contained, attention has shifted to economic growth, which slowed to a near five-year low of 3.0 per cent last quarter.
That slowdown was partly driven by a corruption scandal linked to government infrastructure projects that dented consumer and investor confidence. Most economists said the softer growth backdrop gives the central bank scope to cut rates once more.
Last week, BSP Governor Eli Remolona said the door remains open for further interest rate cuts to support growth.
More than 90 per cent of economists - 25 of 27 - in a February 10-16 poll forecast the central bank would trim its overnight borrowing rate by 25 bps to 4.25 per cent on February 19. Two expected rates to remain at 4.50 per cent.
"The recent upside surprise in CPI is likely to be less significant. The sharp slowdown in growth in the past quarter and slide in public capital spending will be of more immediate concern for the BSP," wrote Kausani Basak, an analyst at ANZ.
"However, weak consumer and domestic confidence will likely restrict the impact of the rate cut. A solution to the governance-related issues followed by a pickup in infrastructure spending will be pivotal for growth momentum to improve in the Philippines this year."
The BSP has eased rates by a cumulative 200 basis points between August 2024 and December 2025, the most dovish among its regional peers, but growth has yet to recover significantly.
Among those with end-year forecasts, a slight majority - 11 of 21 economists surveyed - expected rates to be at 4.25 per cent. Eight saw them at 4.00 per cent, while one each predicted 4.50 per cent and 3.75 per cent.
Median forecasts showed the central bank would hold rates at 4.25 per cent for the rest of this year, a view unchanged from the December poll.
"With real interest rates still restrictive and growth momentum uneven, a modest cut would help support domestic activity without undermining the inflation outlook," said Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines.
"We expect the BSP to accompany the move with cautious, data-dependent guidance, emphasising that future actions will remain contingent on inflation dynamics and external conditions."
(Other stories from the February Reuters global economic poll)
