Foreign banks believe that steady, below-target year-to-date inflation will allow the Bangko Sentral ng Pilipinas (BSP) to cut key interest rates by another 25 basis points (bps) in December.

Following the 1.7-percent headline inflation rate in October, “we continue to expect the BSP to cut policy rates by another 25 bps in the December 2025 meeting—taking the terminal rate to 4.5 percent,” Goldman Sachs Economics Research said in a Nov. 5 report, a copy of which was obtained by Manila Bulletin.

While Singapore-based United Overseas Bank (UOB) similarly forecast a 25-bp cut in the reverse repurchase (RRP) rate on Dec. 11—the last BSP monetary policy meeting for 2025—it expects a lower terminal rate of 4.25 percent through another 25-bp reduction in the first quarter of 2026.

UOB senior economist Julia Goh and economist Loke Siew Ting said in a Nov. 5 report that their full-year inflation forecasts are lower than the BSP’s projections. UOB expects headline inflation to average 1.5 percent this year, below the BSP’s estimate of 1.7 percent, and 2.5 percent next year, lower than the central bank’s projection of 3.1 percent.

The headline rate stood at an average of 1.7 percent as of end-October, below the two- to four-percent target band deemed manageable and conducive to economic growth.

“Both inflation expectations and evolving macroeconomic conditions continue to support the case for further monetary policy easing in the coming months. This aligns with the dovish forward guidance conveyed in the October monetary policy statement and subsequent press briefing, where the BSP indicated that they now see the nominal rate closer to four percent,” UOB said.

For UOB, the latest inflation figures remain consistent with projections, though risks are tilted to the upside heading into 2026 due to possible power rate hikes, rice tariff adjustments, and weather-related supply issues.

But the Singaporean bank warned that “the favorable base effects in rice prices are anticipated to dissipate” next year.

“Moreover, the extension of the rice import ban to end-2025 (from the initial expiry on Oct. 30, 2025), followed by the reimposition of the halt in February to April 2026—after a one-month rice import window in January 2026—will likely exert additional upward pressure on rice prices in the coming months,” it added.

Still, these pressures are likely to be tempered by stable global energy prices, a stronger peso, and softer domestic demand, keeping inflation within the BSP’s target range of two to four percent, UOB said.

Also Singapore-based Oversea-Chinese Banking Corp. Ltd. (OCBC) said in a Nov. 5 report that “with fiscal policies constrained, we expect another 25-bp rate cut from the BSP in December,” bringing the cumulative interest rate reduction to 125 bps in 2025.