After the widely expected 25-basis-point (bp) cut in key interest rates, Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr. signaled the possibility of two more rate cuts this year.

“Depending on the data, we’ll cut twice more; depending on the data, we may not cut at all,” Remolona told a media briefing after the policy-setting Monetary Board (MB) decided to reduce the policy rate to 5.25 percent, from 5.5 percent previously, on June 19, Thursday.

On balance, the MB “sees the need for a more accommodative monetary policy stance,” the Governor said, adding that “emerging risks to inflation from rising geopolitical tensions and external policy uncertainty require closer monitoring.”

Prior to this hint, Remolona said the BSP could proceed with trimming the rate “once more, if things remain on track.” He noted that for now, “things remain on track,” so at least a quarter-point cut is expected for the remainder of 2025. 

As for the latest reduction, Remolona said the MB also “noted indications of a deceleration in global economic activity, driven primarily by uncertainty over US [United States] trade policy and the conflict in the Middle East.”

“This would lead to slower growth in the Philippines. A rise in oil prices, electricity rate adjustments, and higher rice tariffs, would add to inflationary pressures,” he explained.

Since the kick-off of the policy easing cycle in August last year, a total of 125 bps has been slashed from 6.5 percent before the rate-cutting.

Alongside the key borrowing cost, the MB also adjusted the overnight deposit rate to 4.75 percent from five percent previously, and the lending facility rate to 5.75 percent from six percent.

According to Remolona, the continued easing by the MB was driven by the favorable outlook for movements in consumer goods prices. May’s 1.3-percent headline inflation rate, the latest data available, was the lowest in nearly six years, or since late 2019.

As such, the BSP has revised its inflation forecast for 2025 to 1.6 percent from 2.4 percent previously. But it also raised its forecasts for 2026 to 3.4 percent from 3.3 percent, and for 2027 to 3.3 percent from 3.2 percent.

Capital Economics senior Asia economist Gareth Leather said in a commentary that the think tank is expecting two more 25- bp cuts before the end of 2025, bringing the policy rate down to 4.75 percent.

“Low inflation and falling interest rates will provide some support to demand this year. But with fiscal policy being tightened and exports set to weaken, we expect growth to struggle,” Leather said.

Leather noted that the BSP Governor “alluded to the risks to inflation from higher oil prices, but...prices would need to rise to around $100 per barrel for there to be a noticeable impact on inflation.”

Gross domestic product (GDP) growth in the first quarter of 2025 stood at 5.4 percent, a bit faster than the previous quarter, but weaker than the 5.7 percent in the same period last year.