BPI: BSP expected to cut rates as growth concerns mount

The Bangko Sentral ng Pilipinas (BSP) is expected to lower its policy rate by 25 basis points to 5.5 percent on Thursday, as it shifts focus to boosting the economy amid slower-than-expected growth and stable inflation, Bank of the Philippine Islands (BPI) said.

“Recent statements from the BSP also suggest that economic growth will be a key factor in the Monetary Board’s decision,” BPI noted in a recent report. 

“Governor (Eli) Remolona recently noted that the country has a negative output gap and is operating below capacity. He added that a rate cut is on the table in the upcoming Monetary Board meeting, a signal that often precedes a policy action,” it added.

BSP has room to maneuver

BPI said the Philippine peso’s recent stability also gives the BSP flexibility, despite concerns that lower rates could put downward pressure on the currency. However, a weaker peso could help exporters and overseas Filipino workers by increasing their purchasing power. 

While a rate cut is likely, the BSP is expected to limit easing to 50 basis points this year, keeping rates at 5.25 percent by year-end to balance growth support and financial stability, the report showed.