Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr. said the central bank has plenty of room to cut key interest rates on the back of softer inflation, signaling a potential 50-basis-point (bp) cut by year-end.

“So far, the hard data says we have plenty of room to cut, especially because inflation is low,” Remolona said during a press briefing on Friday, May 23.

The country’s inflation eased to a five-year low of 1.4 percent in April, according to the Philippine Statistics Authority (PSA). April’s figure fell far below the government’s target band of two to four percent, but within the BSP’s forecast range of 1.3 to 2.1 percent. Last month’s figure brought the average rate for the first four months to two percent.

As for the projected scale of monetary policy reduction for the rest of 2025, the central bank governor said, “Maybe two more cuts.” This also covers the upcoming June 13 policy meeting, during which analysts expect a 25-bp cut to be delivered.

In terms of pace, the Governor said 25 bps at a time—but not necessarily in consecutive meetings.

He said a 50-bp cut typically signals concern, but noted there is little to worry about when it comes to growth.

While rate cuts are on the table, Remolona said the BSP is still taking baby steps. “But in the meantime, we’re trying to strengthen the transmission mechanism. So a rate cut may be more effective. Somewhat more effective than before.”

Remolona noted that the central bank has to be “careful because we don’t want to cut too much. If we cut to the point where our demand exceeds our capacity, then that will be inflationary.”

The BSP Governor did not pinpoint which among the local and global developments would mainly influence the central bank’s future decisions.

“The hard part is we don’t know [which factor], because this is new territory for us. It’s new territory for the central banks. That’s the most uncomfortable part,” he said.

Remolona was referring to the mounting trade tensions globally, especially the developments revolving around reciprocal tariffs. He said the BSP’s “analytical framework was designed for a different environment.”

To date, the central bank has slashed key interest rates by 100 bps to 5.5 percent, down from 6.5 percent before the easing cycle began in August 2024. If realized, the cumulative 50 bps in further cuts would bring the key borrowing costs to five percent by year-end.

The BSP has four remaining policy meetings for the rest of the year, specifically in June, August, October, and December.