Foreign financial giants and a think tank expect the Bangko Sentral ng Pilipinas (BSP) to further reduce key borrowing costs to 4.5 percent by year-end following the central bank’s shift to more dovish tone.

Netherlands-based financial giant ING has flagged risks that could slow growth from the 2026 forecast of 5.8 percent, which would consequently influence the bank’s policy expectations.

Public infrastructure spending—especially the misuse of flood control funds—and “lingering uncertainty over the impacts of tariffs on investment further compound the risk [to growth],” said Deepali Bhargava, regional head of research at ING Asia-Pacific.

“Given this backdrop, we believe the likelihood of the final 25 bp [basis point] rate cut, currently pencilled in for the first quarter of next year, being brought forward to December has increased meaningfully,” Bhargava said.

According to the economic think tank Oxford Economics, the central bank is expected to maintain its dovish stance after its fourth consecutive rate cut, given a dimmer outlook for gross domestic product (GDP) growth and still well-managed consumer prices.

However, Oxford Economics, which expects a quarter-point cut, said that should inflation surge past expectations, the BSP could delay further easing.

“Recent governance concerns surrounding public infrastructure spending have emerged as a more prominent risk, weighing on business sentiment and dampening the outlook for private investment—an area that accounts for about a quarter of the Philippines’ GDP,” Singapore-based UOB said in a commentary.

UOB Senior Economist Julia Goh and Economist Loke Siew Ting noted the BSP’s evident shift in tone, saying the policy-setting Monetary Board (MB) is clearly more inclined toward further loosening.

As such, UOB has adjusted its forecast to two more reductions by the first quarter of 2026, bringing the terminal rate to 4.25 percent. This is 50 bps lower than the bank’s earlier estimate of 4.75 percent by the end of 2026.

Looking ahead, ING said it will continue to track high-frequency data, particularly business sentiment and government capital spending, for signs of weaker growth.

On Thursday, Oct. 9, the BSP reduced the key interest rate by 25 bps to 4.75 percent from five percent previously. This brought the trimmed rate back to the same level as September 2022, its lowest before a series of rate hikes to a peak of 6.5 percent was delivered.

To date, the MB has slashed the key interest rate by a total of 1.75 percentage points (ppts) from 6.5 percent before the easing cycle began in August last year.

For this year alone, the BSP has reduced the key interest rate by 100 bps across four consecutive policy meetings in April, June, August, and October.