February cut may mark end of BSP’s easing cycle

THE BANGKO SENTRAL ng Pilipinas (BSP) is widely expected to deliver another 25-basis-point (bp) reduction to its key policy rate at its first meeting this year, which analysts said could mark the end of its current easing cycle.

“We expect the BSP Monetary Board to deliver a 25-bp rate cut at its Feb. 19 meeting, consistent with recent guidance that some limited policy space for easing remains,” Maybank Investment Banking Group economist Azril Rosli said in an e-mail. “However, the scope for larger moves may no longer be the case.”

Mr. Rosli said a 50-bp cut will likely be off the table considering the inflation uptick in January even after the Philippine economy slumped in the final quarter of last year.

“On one hand, the inflation trajectory is becoming less benign, with both headline and core measures moving higher, narrowing the room for further easing and making aggressive cuts hard to justify, especially as firmer core inflation points to underlying price pressures,” he said.

In January, headline inflation heated up to its fastest in nearly a year at 2% from 1.8% in December but cooled from 2.9% a year ago.

This marked the first time in about a year that inflation hit the central bank’s 2%-4% target.

Meanwhile, core inflation, which excludes volatile prices of food and fuel, likewise quickened to 2.8% last month, from 2.4% in December and 2.6% in the previous year.

Mr. Rosli noted that this would bring the Monetary Board closer to the end of its easing path.

“(T)here’s a higher chance that February’s move could be a final or near-final calibration, rather than the start of a renewed easing phase,” he said.

A BusinessWorld poll conducted last week showed all 16 analysts surveyed expect the Monetary Board to reduce the target reverse repurchase rate anew by 25 bps to 4.25% on Feb. 19.

DBS Chief Economist Taimur Baig and Senior Economist Radhika Rao said the recent dismal growth will cement a sixth straight rate cut on Thursday.

“The dovish stance for February is likely to be further cemented by disappointing growth numbers for (the fourth quarter of 2025), where headline slowed to 3% year on year, at a five-year low,” they said in a report.

Philippine gross domestic product (GDP) expanded by 3% in the fourth quarter, dragging full-year growth to a post-pandemic low of 4.4% in 2025, as governance concerns amid the flood control controversy dampened investments and spending.

Metropolitan Bank & Trust Co. Chief Economist Nicholas Antonio T. Mapa said a rate cut on Thursday would give the economy its much needed boost sooner, considering the delayed impact of monetary policy easing.

“A tired consumer alongside the lack of private sector investment have been weighing on growth ever since the (COVID-19) reopening,” Mr. Mapa said in a Viber message. “Both could use the shot in the arm provided by the air cover of a BSP cut.”

“A reignited private sector investment push remains the missing link to unlocking new sources of growth, outside mainstay household spending,” he added.

Household consumption growth slowed to 3.8% in the fourth quarter from 4.7% a year ago and 4.1% in the third quarter.

Meanwhile, investments fell by 10.9%, a reversal from the 5.5% rise in the same period in 2024 and steeper than the -2.8% posted in the third quarter.

Hannah Liu, research analyst at Nomura Global Markets Research, also expects a quarter point cut on Thursday, although she sees a 35% chance for the BSP to hold steady.

The Monetary Board will also likely maintain its less dovish stance after it delivers a 25-bp cut on Thursday, she noted, adding that upcoming economic data will guide the BSP’s policy path going forward.

“We expect the BSP’s monetary board meeting to be similar to the one in December, when it turned less dovish and emphasized that the end of its easing cycle is near, after the substantial rate cuts delivered so far,” Ms. Liu said in a report.

“Still, BSP will, in our view, continue to indicate data dependence, given the high uncertainty of the extent of the drag on the economy from the corruption scandal and spillover effects,” she added.

Since August 2024, the central bank has so far lowered borrowing costs by a cumulative 200 bps, which brought the benchmark rate down to 4.5% from 6.5%.

BSP Governor Eli M. Remolona, Jr. earlier left the door open for further easing to help spur domestic demand.

However, he noted that current economic data may have narrowed their easing space, with business confidence starting to recover.

For Mr. Rosli, another rate cut after February will only be possible if inflation eases and growth remains sluggish.

“Beyond February, additional cuts are conditional rather than assured,” he said. “A final 25-bp cut later in 2026 remains possible only if inflation momentum clearly eases and growth continues to underperform.”

The Monetary Board will have six policy meetings this year, with the first one to be held on Feb. 19. The rest are scheduled for April 23, June 18, Aug. 27, Oct. 22 and Dec. 17. — Katherine K. Chan