Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr. struck a more dovish tone on the central bank’s policy path, signaling that the latest quarter-point reduction to 4.75 percent may not be the final easing this year.

Remolona, in a press briefing on Thursday, Oct. 9, backtracked on his earlier, less dovish stance from the August meeting. “I’m withdrawing that comment. It’s possible there will be one more cut this year, but it’s also possible that beyond that, there will be more cuts,” he said.

To note, the BSP decided to reduce the key interest rate by 25 basis points (bps) to 4.75 percent from the current five percent, citing weaker growth outlook owing to infrastructure spending issues.

“What we thought was going to investment wasn’t going there at all. The reason we were underperforming is, I think, in large part because of the governance issues related to infrastructure spending,” Remolona argued.

“Governance concerns on public infrastructure spending have weighed on business sentiment. The stock market has declined, and there are now fewer companies with expansion plans,” Remolona said.

On the output front, BSP Deputy Governor Zeno Ronald R. Abenoja said gross domestic product (GDP) growth could fall short of the government’s lowered target of 5.5 percent to 6.5 percent.

“We are looking at the near-term outlook to be lower than we initially anticipated. There’s probably a greater probability that we will be slightly below those targets that have been set by the government,” Abenoja said.

Abenoja, who oversees the central bank’s monetary and economics sector, mainly attributed the shortfall to infrastructure spending, noting that its performance for the rest of 2025 and into 2026 will continue to influence growth trends.

Remolona also stressed that the negative output gap, which the BSP reported earlier to be narrower, has become wider. The negative output gap refers to the difference between actual and potential GDP.

“As the extent of the issues related to infrastructure spending became clearer, our estimates of the inflation output gap needed to be recalibrated. We now think the gap is wider than we thought,” he said.

He further said that the central bank has adjusted its estimate of the “goldilocks” or neutral rate downward, giving the BSP more room for easing. “We believe [the neutral rate] could be lower than before, giving us more room to reduce the policy rate.”

Previously, looking at five percent, the central bank is now considering settling between four percent and five percent.

As such, the policy-setting Monetary Board (MB) now has “more wiggle room than before,” overturning his earlier comment in the previous policy meeting that another cut by year-end could potentially cap the easing cycle.

It can be noted that the latest reduction brought the policy rate back to its September 2022 level—the lowest level before a series of hikes that pushed it to a peak of 6.5 percent.

To tighten cash flows in financial institutions in light of the flood control cases, the BSP is considering imposing a limit on cash transfers following its recent move to cap large-value withdrawals at ₱500,000.

“Now there will be a threshold on transfers in general—whether cash or digital. We are examining the patterns more closely to determine an appropriate threshold, and we are also considering other rules that would make it harder for this practice to continue,” Remolona said.

Remolona further said that the BSP is looking into introducing reforms to curb large withdrawals even from state-owned banks that were not previously flagged. He argued that banks had no choice but to release funds to contractors whose accounts legitimately received funds from the Treasury.

“We’re going to figure out when banks can actually refuse [transactions] based on suspicion of corruption.”