Hong Kong-based Standard Chartered Bank is more dovish than the market as it expects the Bangko Sentral ng Pilipinas (BSP) to deliver three additional quarter-point reductions in the key borrowing cost before year-end.

Jonathan Koh, Standard Chartered Bank economist and foreign exchange (forex) analyst for Asia, said during a July 25 virtual press briefing, which discussed the bank’s global and Philippine outlook for the second half of 2025, that he is “more aggressive" than market expectations of 25 to 50 basis points (bps) in interest rate cuts for the rest of the year.

“I’m a little bit more aggressive,” Koh said, with an expectation of a 25-bp cut in August, another 25 bps in October, and a final 25 bps in December. If realized, the key interest rate would settle to 4.5 percent from the current 5.25 percent.

Meanwhile, Koh flagged risks to this expectation such as the resurgence of the United States (US) dollar and concerns over imported inflation. “Potentially, the BSP may be a little bit less aggressive,” he added.

So far, consumer prices—especially for rice, oil, rent, and restaurants—are starting to go down, Koh noted, adding that these will help ease inflation in the coming months. He expects inflation to clock in at an average of 1.8 percent, still below the government’s target band of two to four percent.

While he sees inflation to remain subdued, he expects the country’s gross domestic product (GDP) growth to accelerate below its potential. Still, he anticipates the country’s economic output to have expanded by 5.9 percent in the second quarter, and sees it growing by six percent in 2025—at the midpoint of the downscaled growth goal of 5.5 to 6.5 percent.

He believes private consumption is “going to remain steady, but not stellar.” This is blamed not on inflation but on a weaker labor market.

“I know the unemployment rate is low, but if you were to look at the details of the labor market, you can see that high-quality employment growth is actually contracting,” Koh asserted. For Koh, high-quality employment refers mainly to jobs in private establishments with regular salaries, which is declining year-to-date—a potential drag on consumer spending.

The latest data from the Philippine Statistics Authority (PSA) showed employment climbed to a 96.1-percent rate in May from 95.9 percent in May last year. This translates to 50.29 million Filipinos with jobs, up from 48.87 million a year earlier.

Similarly, the underemployment rate, reflecting the share of employed Filipinos still seeking additional work, also increased to 13.1 percent in May from 9.9 percent a year ago. This means 6.6 million employed Filipinos sought extra hours or additional jobs during the month.

On the investment front, Koh noted that lending growth had been observed to be picking up recently in the country, citing the earlier rate cuts since August last year. “So, you can see that rate cuts are already helping,” Koh said.

“Rate cuts are helping, but at the same time, being held back by the softer investment sentiment,” he added. Such is the reason why, looking ahead, he sees credit performance to improve modestly.

To date, the BSP has slashed the policy rate by a total of 125 bps to 5.25 percent from 6.5 percent prior to the easing cycle.