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Recto backs two more BSP rate cuts by year-end despite possible Fed pause
Business
Banking & Finance
Recto backs two more BSP rate cuts by year-end despite possible Fed pause
Recto backs two more BSP rate cuts by year-end despite possible Fed pause
By Derco Rosal
Published Jul 22, 2025 12:00 am
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Updated Jul 21, 2025 01:48 pm
At A Glance
- Citing still favorable inflation data, President Marcos' chief economic manager said the Bangko Sentral ng Pilipinas (BSP) could proceed with delivering two quarter-point cuts in the key interest rate by year-end even if the United States (US) Federal Reserve decides to pause its easing cycle.
Citing still favorable inflation data, President Marcos’ chief economic manager said the Bangko Sentral ng Pilipinas (BSP) could proceed with delivering two quarter-point cuts in the key interest rate by year-end even if the United States (US) Federal Reserve (Fed) decides to pause its easing cycle.
Speaking to reporters last week, Department of Finance (DOF) Secretary Ralph G. Recto said he believes the Philippines has room for further reductions in the key borrowing cost, the magnitude of which remains influenced by the US policy.
“I think we have room to cut, maybe not two, depending on what happens in the US as well. But as of today, I would assume that we’re okay for two rate cuts,” said Recto, who represents the Marcos administration in the BSP’s policy-setting Monetary Board (MB).
It can be recalled that the latest rate reduction last month had considered signs of global economic slowdown driven primarily by uncertainty over US trade policy and the Iran-Israel conflict, which has now subsided. Aligning with market expectations, the BSP reduced the key borrowing cost by 25 basis points (bps) to 5.25 percent from 5.5 percent previously.
BSP Governor Eli M. Remolona Jr. said earlier that the MB may reduce rates “twice more” depending on the economic data.
“I think the BSP is clear that we expect a 50-bp rate cut by the end of the year—25 [bps] and 25 [bps]. I believe they’ve messaged that, too, right? Messaged that as well early on,” Recto told reporters.
For the upcoming policy meeting in August, the possibility of another rate cut is yet to be discussed by the MB, but Recto said he is “in favor” of two additional reductions by year-end—25 bps next month, and another 25 bps in December.
“As of today’s data, I think inflation is on its way down. We just don’t know what’s happening in the US right now or what’s going to happen there. We’ll be closely watching that as well,” Recto said.
Recto noted that US President Donald Trump “wants” the US Fed to cut rates despite the dampened market expectation that it will continue easing due to higher US inflation. “But for us, as we’re looking at our own inflation data, so far that looks good,” Recto argued.
Consumer price increases climbed slightly in June to 1.4 percent from May’s five-and-a-half-year low of 1.3 percent. A spike in inflation was tempered by a substantial drop in rice prices, which fell to their lowest in three decades, or since 1995 levels.
Excluding May’s 1.3-percent inflation rate, the June headline figure remained the slowest in nearly six years, or since November 2019, based on official data from the Philippine Statistics Authority (PSA). It also fell within the BSP forecast range of 1.1 to 1.9 percent for the month, though it remained below the government’s retained target band of two to four percent.