The Bangko Sentral ng Pilipinas’ (BSP) policy rate may fall to as low as 3.25 percent by next year amid slowing Philippine economic growth, according to the Economist Intelligence Unit (EIU).

In an Oct. 13 report obtained by Manila Bulletin, EIU Asia analyst Kalyani Honrao said they continue to expect the BSP to cut key interest rates by 25 basis points (bps) when the Monetary Board (MB) next decides on the monetary policy stance on Dec. 11, the last policy meeting for 2025.

Beyond a projected policy rate of 4.5 percent before year-end, EIU expects 125 bps more in rate cuts in 2026.

According to EIU, the terminal rate for the key interest rate would be 3.25 percent by the third quarter of next year.

EIU correctly forecast the BSP’s pause in easing last February and the four successive rate cuts in April, June, August, and October.

The policy rate currently stands at 4.75 percent, after the MB reduced it by 25 bps last Oct. 9 amid what the BSP described as a weaker domestic economic growth outlook, clouded by the scandal over massive flood control funds lost to corruption in recent years.

“Weak private investment and sluggish domestic demand in the second quarter of 2025, despite ongoing monetary easing and moderating inflation, suggest that the central bank will maintain its accommodative policy in 2025 to 2026,” EIU said.

“Social instability and risks to political stability tied to the anti-corruption movement will also keep business confidence muted in the months ahead,” it added.

Also, EIU said its pessimistic outlook partly stems from the impact of typhoons such as Super Typhoon “Nando” (international name: “Ragasa”) on the farm and hospitality sectors, which are expected to take time to recover.

For EIU, “currency concerns are unlikely to disrupt the BSP’s monetary easing cycle as pro-growth measures take precedence.”

It noted that the Philippine peso plunged by 2.3 percent against the United States (US) dollar from July to September, at the height of anti-corruption protests following the flood control scandal.

The local currency has also been dragged down by slowing export growth after the front-loading of shipments ahead of the US’ 19-percent tariff on Philippine-made goods that took effect in August, EIU said.

As such, the peso’s weakness against the greenback “is likely to persist, as global economic uncertainty and risks to domestic political stability will weigh on foreign direct investment (FDI),” according to EIU.

EIU nonetheless pointed to a benign inflation outlook that would support the BSP’s dovish stance, especially with the end-September headline rate averaging 1.7 percent—below the central bank’s two- to four-percent target range of manageable annual price increases deemed conducive to economic growth.

“Although potential upward revisions to electricity prices and a suspension of rice imports until April 2026 are likely to exert upward pressure on inflation, it is unlikely to breach the BSP’s target,” EIU said.

EIU believes that “growth headwinds will remain the main focus of the central bank.”