February rate cut still possible despite December inflation uptick, analysts say

THE BANGKO SENTRAL ng Pilipinas (BSP) could deliver a sixth straight 25-basis-point (bp) cut next month to provide economic stimulus as inflation is likely to be within target this year despite an expected pickup.

“We continue to believe that the Monetary Board will cut its reverse repo rate by a further 25 bps at its meeting next month, in spite of the upside surprise in December CPI (consumer price index), as supporting growth remains more pressing,” Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco and Asia economist Meekita Gupta said in a commentary on Thursday.

“Governor Eli Remolona said on Tuesday that, as things stand, the bank is more inclined to hit the pause button in February, but at the same time he acknowledged that the door remains open for at least one more reduction. Note that the Q4 GDP (gross domestic product) report is due weeks before the next Board meeting and, should we see no real improvement from Q3’s abysmal 4% rate, then further easing would be almost a given,” they said, adding that they expect growth to have picked up to 4.7% last quarter.

Headline inflation picked up to 1.8% climb in December from 1.5% in November. For 2025, the CPI averaged 1.7%, the slowest clip seen in nine years or since the 1.3% in 2016. This was a tad higher than the Bangko Sentral ng Pilipinas’ (BSP) 1.6% full-year forecast but below its 2%-4% target.

Inflation may accelerate to 2.1% this year, “with risks tilted slightly to the upside,” Mr. Chanco and Ms. Gupta said. This is well below the BSP’s 3.2% forecast.

The Monetary Board will hold its first policy review for 2026 on Feb. 19. It has so far slashed benchmark borrowing costs by 200 bps since it began its easing cycle in August 2024, bringing the policy rate to an over three-year low of 4.5%.

BSP Governor Eli M. Remolona, Jr. said on Tuesday that they could consider another cut next month’s meeting, but noted that the current policy rate is already “very close” to where they want it to be, signaling an imminent end to their easing cycle.

He said only weaker-than-expected growth would prompt them to deliver more than one easing move this year.

Meanwhile, DBS Senior Economist for ASEAN Han Teng Chua sees room for two 25-bp reductions this year amid dismal economic prospects.

“Our baseline projection is for one more cut beyond February to the neutral rate of 4% to address downside risks to growth,” Mr. Chua said in a commentary.

However, expectations of further monetary easing have put pressure on the peso, especially with the BSP signaling that it would not heavily intervene in the foreign exchange market. On Wednesday, the peso fell to new record low of P59.355 per dollar. — Katherine K. Chan