BSP seen front-loading rate cuts in H1

Bangko Sentral ng Pilipinas (File photo / Philippine Daily Inquirer)

The Bangko Sentral ng Pilipinas (BSP) would likely front-load all its rate cuts for 2025 in the first half in a bid to boost growth as soon as possible and insulate the country from risks coming from a second Donald Trump presidency, BMI Research said.

In a commentary on Thursday, the unit of the Fitch Group said that while it now forecasts fewer reductions to the local policy rate after the US Federal Reserve signaled lesser easing, the BSP might have to deliver its planned rate cuts as early as possible to support the economy.

This, as the looming impact of another Trump presidency on the global economy, particularly trade and immigration, might weigh on domestic growth prospects.

READ: US Fed’s December rate cut should be its last for now — official

Overall, BMI said it expects the BSP to match the shallower easing of the Fed, penciling on a total of 75 basis points (bp) cuts this year from the previous forecast of 125 bps.

But that doesn’t mean that the BSP cannot cut ahead of the Fed again, it added.

”The bigger picture is that the BSP does not have the space to cut much more than the Fed if it hopes to preserve external stability,” BMI said.

”This is not to say that the BSP must match the Fed’s timing when it comes to cuts. The BSP has clearly demonstrated that it is prepared to act independently… We think that this time it will be similar, with the BSP enacting the bulk of its policy rate cuts in H1 and the Fed in H2,” it added.

The BSP last year delivered a total of 75-bp cut to the key rate that banks typically use as a guide when pricing loans.

And Governor Eli Remolona Jr. had hinted at additional easing moves for this year as financial conditions are still “somewhat tight”, even floating the possibility of another rate cut at the Feb. 20 meeting of the Monetary Board.

At an event in Manila on Thursday, Remolona said that Trump’s tariff threats and protectionism could potentially stoke inflation, although he acknowledged that the Philippines is “in better shape” to mitigate the risks compared to other countries.

For BMI, the BSP looks ready to unleash more easing if Trump’s policies significantly slows local economic growth, even if it means more weakness for the peso.

“Our current forecasts are quite conservative, with risks skewed towards additional cuts. Although we see it as a tail risk, the imposition of 10-20 percent blanket tariffs by the US on all goods could further reduce the Philippines’ real GDP growth,” BMI said.

“The BSP will prioritize the economy in such a scenario even if it comes at the expense of currency stability,” it added.