Singapore's DBS Bank Ltd. expects the Bangko Sentral ng Pilipinas (BSP) to end its easing cycle in the third quarter of this year—a year after it began loosening monetary policy in August last year.

"The Philippine central bank, the BSP, is on course with its rate cuts. Another 50-basis point (bp) cut is likely, bringing the benchmark overnight repo rate to its terminal level of five percent by the end of the third quarter of 2025," from the current 5.5 percent, DBS Group Research senior rates strategist Eugene Leow and rates strategist and economist Samuel Tse said in a June 9 report.

The Monetary Board (MB), the BSP's highest policy-making body, will next decide on the monetary policy stance on June 19. After this month's anticipated rate cut of at least 25 bps, the MB's next interest rate decision will be on Aug. 28—the only meeting within the third quarter.

The last two MB meetings on monetary policy for 2025 will be in the fourth quarter, on Oct. 9 and Dec. 11.

"Including the previous 100 bps in cuts, the BSP will have reduced the policy rate by a total of 200 bps since mid-2024," DBS noted.

For DBS, "rapidly decelerating CPI [consumer price index] inflation, which fell from 8.7 percent in early 2023 to 1.4 percent in April 2025, allows further rate cuts."

The government reported last week that headline inflation in May fell to 1.3 percent, bringing the first five-month average to 1.9 percent—below the targeted two- to four-percent range of annual price increases deemed manageable and conducive to economic growth.

The Singaporean bank believes that lower interest rates would help shield the Philippine economy from external shocks, mainly coming from United States (US) tariffs.

"While previous reciprocal tariffs on the Philippines were relatively low at 17 percent, a potential trade war renewal poses risks to the external sector," DBS said, citing that Philippine exports to the US cornered more than 15 percent of total last year.

As such, "potential spillover effects on the domestic economy and labor market warrant concern," it said.

DBS said that "at this juncture, the real interest rate remains restrictive at 4.1 percent."

In this regard, DBS forecasts short-end Philippine government bond yields to "see more notable downward pressure, and the spread against US Treasury yields should compress."