Private-sector economists believe the Bangko Sentral ng Pilipinas (BSP) has room for two more cuts in key borrowing rates, following four straight months of inflation staying below the government’s target band of two to four percent, and amid continued risks of economic underperformance.

“Given that the latest inflation reading remained below the central bank’s inflation target range for the fourth consecutive month and domestic growth is still subject to downside risks, there is scope for the BSP to further loosen its monetary policy in the second half of 2025,” Singapore-based United Overseas Bank (UOB) said in a commentary released last Friday, July 4.

Last week, the Philippine Statistics Authority (PSA) reported that annual consumer price increases inched up slightly to 1.4 percent in June, reversing the downward trend seen since March. Excluding May's 1.3-percent inflation rate, the June figure remained the slowest in nearly six years, or since November 2019.

Since slipping below the two- to four-percent inflation target from February's 2.1 percent, headline prints have never clocked in above the target. It stood at 1.8 percent in March, then continued falling to 1.4 percent in April, and 1.3 percent in May.

Its uptick last month was attributed to increases in housing, water, electricity, gas, and other fuel costs, which climbed by 3.2 percent from 2.3 percent in May. A slower drop in transport prices—down 1.6 percent last month compared to a 2.4-percent decline in May—also contributed to the upward pressure.

However, June inflation still fell comfortably within the BSP forecast range of 1.1 to 1.9 percent. A steeper drop in rice prices to their lowest in three decades, or since 1995, helped temper the overall inflation. Rice prices deflated faster in June, falling by 14.3 percent compared to the 12.8-percent drop in May.

UOB senior economist Julia Goh and economist Loke Siew Ting are “sticking to our view” that two quarter-point BSP cuts will be delivered by the end of 2025. This expectation anchors to BSP Governor Eli M. Remolona’s comments prior to the release of June inflation that two more cuts are possible by year-end given the still subdued inflation and global uncertainties.

Seeing how the domestic economy unfolded in the first half, New York-based Citi expects inflation to fall below the central bank’s two- to four-percent target range through the first three months of next year.

“Downside inflation risks come amid further signs of slowdown in external and domestic demand,” Citi said, citing the BSP’s statement that 2025 inflation “would remain below target but 2026 to 2027 inflation will settle within target, but emerging risks to inflation need to be monitored, alongside the impact of prior policy adjustments.”

Remolona earlier said that Filipino consumers and businesses are deferring their big purchases and investments due to lingering uncertainties caused by external developments, such as United States (US) tariffs and the ongoing conflict in the Middle East.

Looking at these developments, Citi stands firmly by its previous forecast that the policy-setting Monetary Board (MB) will proceed with cutting further by a total of 50 basis points (bps) by year-end—a quarter-point each in August and October. It also sees this continuing in the first quarter of 2026, with a 25-bp easing in February.

If the BSP proceeds with an additional 50 bps of rate easing this year, the key borrowing rate will settle at 4.75 percent, down from the current 5.25 percent. So far, the BSP has slashed a total of 125 bps since it began its easing cycle in August last year, when the rate stood at 6.5 percent.