The Economist Intelligence Unit (EIU) still expects jumbo interest rate cuts by the Bangko Sentral ng Pilipinas (BSP) for the rest of 2025 as monetary authorities are seen prolonging the easing cycle.

“We expect the BSP to continue cutting rates at each of its remaining meetings this year in August, October and December,” EIU Asia analyst Kalyani Honrao and Asia-Pacific regional director Alex Holmes said in a June 19 report obtained by Manila Bulletin.

As EIU projected 25 basis points (bps) each in interest rate reductions at the last three policy stance meetings of the BSP’s Monetary Board (MB), the key interest rate is seen dropping to 4.5 percent by end-2025, from 5.25 percent at present.

The MB last week further lowered the policy rate by 25 bps, citing the need for “a more accommodative monetary policy stance.”

For EIU, “the balance of risks is titled towards larger cuts” moving forward.

EIU noted that while the BSP had acknowledged the upside inflation risks wrought by geopolitical tensions, specifically the surge in global oil prices after Israel attacked Iran, the central bank still pushed through with lowering interest rates.

“That aligns with our view that the inflationary impact of the Middle East conflict will be relatively mild in Asia, and that it should not distract central banks from loosening to cushion the larger headwind—the United States (US)-induced trade shock,” EIU said.

By Tuesday, June 24, Brent oil prices dropped by over seven percent to $68 per barrel, reversing the upward trend that started when tensions intensified in the Middle East two weekends ago.

Also, EIU noted that “real rates—the cost of borrowing adjusted for inflation—are at multi-year highs in the Philippines,” which it said “is not a good position from which to be facing a demand shock.”

EIU cited that the BSP has become more dovish following the June 19 MB monetary policy stance meeting, especially as the central bank projected inflation to fall to 1.6 percent this year.

EIU said it expects headline inflation in the Philippines to average 1.8 percent in 2025, citing that the BSP itself had pointed to “indications of a deceleration in global economic activity.”

Inflation averaged 1.9 percent as of end-May, below the targeted two- to four-percent annual price increases deemed manageable and conducive to economic growth.