With falling inflation and elevated positive real interest rates, the Bangko Sentral ng Pilipinas (BSP) is all set to further slash the key borrowing rate on June 19, according to Singapore-based United Overseas Bank (UOB).
BSP has 'plenty of room' to cut interest rates—UOB
Published Jun 5, 2025 06:23 pm
The five-and-a-half-year low headline inflation of 1.3 percent recorded in May "reinforc0es our view that the BSP will cut the overnight reverse repurchase (RRP) rate by another 25 basis points (bps) to 5.25 percent" when the policy-making Monetary Board decides on the monetary policy stance two Thursdays from now, UOB economist Loke Siew Ting said in a June 5 report.
"After that, the easing path will hinge on global tariff and financial market developments as well as incoming inflation and domestic growth data," UOB said.
The Singaporean bank said it helps that "higher positive real interest rates, which are at an almost 10-year high, also indicate that the central bank has plenty of room to ease in the near term."
UOB expects a total of 75 bps more in BSP rate cuts until year-end, to bring the policy rate further down to 4.75 percent.
In particular, it sees the BSP reducing key interest rates by 25 bps each in the three remaining quarters of 2025, before pausing in the first quarter of 2026.
While inflation averaged 1.9 percent during the first five months—below the targeted two- to four-percent annual price increases deemed manageable and conductive to economic growth, UOB maintained its full-year forecast at two percent, "given the ongoing non-monetary intervention by the national government as well as expectations of lower global oil prices and a stronger Philippine peso in the remaining months of the year."
"In the absence of adverse weather events, softer global demand on account of uncertainty surrounding global trade and tariff policies is also expected to further keep inflation modest in the near term," UOB said.