Metrobank expects the Monetary Board to reduce its key policy rate by 25 basis points to 4.25 percent, arguing that softer economic conditions now outweigh near-term inflation concerns.
Metrobank forecasts that the Monetary Board will reduce its key policy rate by 25 basis points to 4.25 percent, arguing that softer economic conditions now outweigh near-term inflation concerns.
The slowdown was largely attributed to weaker household spending and subdued private investment—two pillars that have traditionally powered the Philippine economy.
Growth losing steam
“Household expenditure continues to face headwinds, and this softness in domestic demand strengthens the case for monetary easing,” Metrobank said in its latest market outlook published on Wealth Insights.
A timely rate cut, the bank noted, could provide the necessary support to reinvigorate growth momentum, particularly as near-term vulnerabilities persist.
While economic activity is projected to gain traction in the second half of 2026, Metrobank believes a proactive policy response may help cushion the economy during the slowdown.
Inflation within target
Inflation remains manageable despite a slight uptick at the start of the year. Consumer prices rose to 2 percent in January from 1.8 percent in December, driven mainly by higher utility costs, even as food inflation continued to ease.
Metrobank expects inflation to trend toward the lower end of the BSP’s target range this year, partly due to base effects from last year’s low readings. The continued resumption of rice imports is also seen tempering price pressures.
“With inflation firmly within the target range, the BSP retains room to recalibrate policy in favor of growth,” the bank said.
Balancing policy risks
A 25-basis-point reduction would narrow the policy rate gap between the Philippines and the United States to 50 basis points.
While a tighter interest rate differential could affect capital flows, Metrobank believes currency movements may depend more on business and consumer confidence than on rate spreads alone.
Looking ahead, the bank noted that further easing in April remains possible if inflation stays subdued. However, sustained increases in rental and utility prices could limit additional cuts.
“Monetary policy remains data-dependent,” Metrobank said. “While supporting growth is the immediate priority, the BSP will continue to balance price stability and financial market considerations in the months ahead.”
As policymakers convene, markets will closely watch whether the central bank opts to provide relief to a cooling economy while inflation remains contained—an opportunity that analysts say may be narrow but timely. —Ed: Corrie S. Narisma
