United Kingdom (UK)-based think tank Pantheon Macroeconomics opposes the Bangko Sentral ng Pilipinas’ (BSP) view that the latest key policy rate of five percent has reached the “sweet spot,” arguing that it remains elevated even as consumer prices hike faster over the next year or so.

“We disagree strongly with the notion that the new benchmark rate is now in the ‘sweet spot,’ given how high it still is, in real terms, and how it’s likely to remain comfortably above-average—that is, tight,” Pantheon Macroeconomics chief emerging Asia economist Miguel Chanco and Asia economist Meekita Gupta said in a commentary published last Friday, Aug. 29.

Pantheon Macroeconomics noted that this will persist even as inflation gradually rises over the next year and beyond.

“Tellingly, and unsurprisingly from our perspective, the share of firms which believe that high lending rates are a constraint was still above-average as at the second quarter,” the think tank added.

To note, Pantheon Macroeconomics cited zero improvement in the central bank’s credit access index or the measure of how efficient it is for businesses to get financing from banks.

“All told, we’re sticking to our once-dovish but now-mainstream end-2025 rate forecast of 4.75 percent, with the final reduction likely to come in December, after what we think will be a poor quarter-three GDP [gross domestic product] report in November,” the think tank said.

It projected the country’s output growth to slow to 4.9 percent in the third quarter from 5.5 percent in the previous quarter, before recovering to 5.2 percent in the last quarter—bringing their full-year 2025 forecast to 5.3 percent. If realized, this would mark the third-consecutive year the Philippines falls short of its growth target.

For also UK-based Oxford Economics, the central bank “will adopt a cautious approach while retaining an easing bias,” expecting, in particular, the likelihood of another 25-basis-point (bp) reduction before 2025 ends.

“To achieve the low end of the growth target, growth would have to accelerate to 5.6 percent year-on-year in the second half [of 2025], emphasizing the necessity for more accommodative monetary policy to support growth,” Oxford Economics lead economist Sunny Liu said in an Aug. 28 report.

To note, Philippine GDP expanded by an average of 5.4 percent in the first half of the year, falling short of the government’s downscaled target of 5.5 to 6.5 percent. BSP Governor Eli M. Remolona Jr. asserted earlier that the central bank’s recent interest rate cuts are “significant enough” to propel growth.

Meanwhile, Germany-based Deutsche Bank has a rosier growth outlook for both the current quarter and full-year periods.

“Our GDP growth forecasts suggest that this could hold, if no further external shocks materialize, such as from semiconductor tariffs,” Deutsche Bank Research said in an Aug. 29 commentary.

In particular, Deutsche Bank Research anticipates the economy to expand by 5.9 percent in the second semester, and 6.1 percent for the entire year—both within the government’s target range.

“However, the downside risks to growth are still material, as tariffs and its uncertainty would not only impact ‘hard’ trade activity but also ‘soft’ corporate and household sentiment,” Deutsche Bank Research said.

According to Deutsche Bank Research, the remaining interest rate cut could happen in December—unchanged in October—as the BSP still awaits the economic data for the July-to-September period.

“Our prevailing forecast is for the BSP to cut a final time by 25 bps in December, marking the end of its easing cycle with the terminal rate at 4.75 percent,” it said.

Singapore-based DBS Bank Ltd. and American banking giant Citi have priced in further easing beyond the August cut, with the latter sounding more dovish in its outlook.

“We have penciled in a 25-bp rate cut each for the BSP and BI [Bank of Indonesia] in the rest of 2025, with a higher likelihood of additional cuts by the Indonesian central bank within the fourth quarter of 2025, while the BSP pushes for transmission of rate cuts undertaken to date,” DBS said in an Aug. 29 report.

Meanwhile, Citi sees 25 bps of cuts each in October 2025 and February 2026, citing inflation likely staying below the central bank’s two- to four-percent target range until early 2026, coupled with weaker growth forecasts of 5.3 percent for both 2025 and 2026.

“But [we] now see a significant risk of the October 2025 cut being pushed back to December 2025, as the BSP could remain cautious in October about upside inflation risks stemming from the 60-day suspension of rice imports effective Sept. 1, 2025, which is aimed at raising domestic paddy prices,” Citi said.

To date, the policy-setting Monetary Board (MB) has slashed the key interest rate by a total of 1.5 percentage points (ppt) from 6.5 percent before the easing cycle began in August last year.

For this year alone, the BSP has reduced the policy rate by 75 bps across three consecutive policy meetings in April, June, and August. The remaining policy meetings are scheduled in October and December.