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Manila Bulletin devider Business devider Banking & Finance devider Goldman Sachs expects BSP rate cuts in next three quarters

Goldman Sachs expects BSP rate cuts in next three quarters

Published Aug 11, 2025 12:00 am
Amid expectations of slower economic growth and lower inflation this year, global investment banking giant Goldman Sachs sees more interest rate cuts by the Bangko Sentral ng Pilipinas’ (BSP) Monetary Board (MB) during the next three quarters before pausing its easing cycle.
In an Aug. 7 report, a copy of which was obtained by Manila Bulletin, Goldman Sachs Economics Research lowered its 2025 gross domestic product (GDP) growth projection for the Philippines to 5.4 percent—below the government’s downgraded target range of 5.5 to 6.5 percent—from 5.6 percent previously.
Its Philippine growth forecast for this year is also lower than last year’s 5.7-percent GDP expansion.
“Given the soft domestic activity and subdued inflation (0.9 percent year-on-year in July versus the BSP’s inflation target band of two to four percent), we add two more cuts to our BSP policy rate forecast to 75 basis points (bps) more cuts in the cycle—25 bps each in the third quarter, the fourth quarter, and the first quarter of 2026,” the report read.
Prior to the release of second-quarter GDP data, Goldman Sachs had forecast a final BSP rate cut in the third quarter—at the Aug. 28 MB meeting.
In an earlier Aug. 5 report, Goldman Sachs Economics Research said that it “sees risks of more cuts in the fourth quarter if growth slows considerably amid subdued inflation.”
As such, Goldman Sachs now expects a terminal policy rate of 4.5 percent by the first quarter of next year. The key interest rate currently stands at 5.25 percent.
Goldman Sachs cited that BSP Governor Eli M. Remolona Jr. had said that the central bank sees two more rate cuts this year, and that a cut in August is possible if growth weakens and inflation improves more than expected.
Before 2025 ends, the MB has three remaining meetings to decide on the monetary policy stance—this month, in October, and in December.
The investment bank noted that second-quarter Philippine growth was “mainly driven by higher external contribution, with partial offset from slower government consumption expenditure and gross fixed capital formation growth.”
It said the economic impact of spending related to the 2025 midterm elections last May was already waning, as government expenditure growth eased to 8.7 percent year-on-year in the second quarter from 18.7 percent in the first quarter.
“Gross fixed capital formation expenditure growth also slowed to 2.6 percent year-on-year in the second quarter (versus 6.5 percent year-on-year in the first quarter), owing to a contraction in public construction expenditure,” it noted.

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Goldman Sachs Economics Research Bangko Sentral ng Pilipinas (BSP) Eli M. Remolona Jr. interest rates inflation rate gross domestic product (GDP) growth
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