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Manila Bulletin devider Business devider Banking & Finance devider Low inflation, slow economic growth point to quarterly BSP rate cuts—Goldman Sachs

Low inflation, slow economic growth point to quarterly BSP rate cuts—Goldman Sachs

Published Aug 26, 2025 03:35 pm
Investment banking giant Goldman Sachs expects the Bangko Sentral ng Pilipinas (BSP) to cut key interest rates by 25 basis points (bps) on Thursday, Aug. 28, amid low domestic inflation and slower economic growth.
In an Aug. 22 report obtained by Manila Bulletin, Goldman Sachs Economics Research noted that the 25-bp reduction in the BSP policy rate to five percent from the current 5.25 percent by Thursday is in line with market consensus.
“We continue to expect inflation to remain subdued in the remainder of 2025 as food prices inflation continues to be low, driven by rice prices,” Goldman Sachs said, citing July’s almost six-year-low rate of 0.9 percent year-on-year. The end-July headline inflation average of 1.7 percent is below the BSP’s two- to four-percent target band of manageable annual price increases deemed conducive to economic growth.
“Meanwhile, domestic activity slowed in the second quarter on moderation in government spending and investment growth, as global uncertainty weighed on investment decisions,” the report added. Gross domestic product (GDP) grew by 5.5 percent year-on-year during the April to June period.
The investment bank also pointed to BSP Governor Eli M. Remolona Jr.’s recent pronouncement that sustained monetary policy easing is “quite likely” this month.
Thursday’s interest rate review is the lone policy stance meeting of the policy-setting Monetary Board (MB) for the third quarter of 2025.
As Manila Bulletin reported earlier, Goldman Sachs anticipates BSP rate cuts during each of the next three quarters before pausing its loosening cycle.
Early this month, Goldman Sachs Economics Research lowered its 2025 GDP growth forecast 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 projection for this year is also lower than last year’s 5.7-percent GDP expansion.
“Given the soft domestic activity and subdued inflation, we add two more cuts to our BSP policy rate forecast to 75 bps more cuts in the cycle—25 bps each in the third quarter, the fourth quarter, and the first quarter of 2026,” Goldman Sachs had said.
Prior to the release of second-quarter GDP data, Goldman Sachs had forecast a final BSP rate cut during the third quarter—at the Aug. 28 MB policy meeting.
As such, Goldman Sachs now expects a terminal policy rate of 4.5 percent by the first quarter of next year.
Before 2025 ends, the BSP’s MB has three remaining meetings to decide on the monetary policy stance—this week, in October, and in December.

Related Tags

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