The widely anticipated interest rate cut by the Bangko Sentral ng Pilipinas (BSP) on Thursday, Dec. 11, would not be the end of its monetary easing, with foreign banks expecting further reductions early next year as the central bank seeks to help address slowing economic growth.

Following a 25-basis-point (bp) reduction in the policy rate to 4.5 percent at the BSP Monetary Board’s (MB) final monetary policy meeting for 2025, Goldman Sachs Economics Research forecasts a terminal key interest rate of 4.25 percent through another 25-bp cut in the first quarter of 2026, a Dec. 5 report obtained by Manila Bulletin showed.

The global investment banking giant attributed its outlook to the 4.5-year-low third-quarter economic growth of four percent due to weaker investment and consumption, with indicators pointing to further cooling in the fourth quarter as the manufacturing purchasing managers index (PMI) slipped into contraction in November.

Goldman Sachs also cited muted headline inflation, which had made the BSP more dovish and signaled greater room to support growth.

Japanese financial giant MUFG Bank Ltd. likewise forecasts a terminal rate of 4.25 percent by the first half of next year, “with risks tilted toward more and earlier rate cuts.”

“Softer growth, uncertain fiscal impulse, and a continued negative output gap we forecast in the Philippines imply the BSP is likely to remain dovish moving forward,” MUFG Global Research senior currency analyst Michael Wan said in a Dec. 8 report.

“The lagged impact of a negative output gap is likely to weigh on core inflation, while low global oil and rice prices are also likely to cap any upside pressures on headline inflation more broadly. There are some risks arising from the government’s move to ban rice imports into end-2025 coupled with a new formula for rice import tariffs for 2026, but overall we think low global rice prices and still decent domestic rice inventories should cap upside pressures for now,” Wan added.

Singapore-based United Overseas Bank (UOB) said in a Dec. 5 report that “beyond 2025, we still see the possibility of one final 25-bp reduction to 4.25 percent in the first quarter of 2026 to boost domestic growth momentum.”

“This projected terminal rate aligns closely with the BSP’s indicated nominal rate of around four percent. Additionally, the Fed’s [United States Federal Reserve] ongoing easing cycle further reinforces the case for the BSP to continue cutting rates in early 2026,” said UOB Global Economics & Markets Research senior economist Julia Goh and economist Loke Siew Ting.

Also Singapore-based DBS Bank Ltd., meanwhile, expects a lower neutral rate of four percent through 50-bps worth of additional cuts in 2026 on top of the five straight 25-bp reductions this year.

“Within-target inflation will provide the central bank room to shift focus to the weakening growth outlook due to the corruption scandal and resultant depressed sentiments,” DBS Group Research said in a Dec. 8 report.

Thursday’s rate cut is expected by DBS to be accompanied by a dovish commentary from the BSP, although the Singaporean bank believes Philippine monetary authorities are unlikely to ease policy further through “bunched up moves,” citing Governor Eli M. Remolona Jr.’s earlier comments emphasizing “baby steps.”

Another Singapore-based bank, Oversea-Chinese Banking Corp. Ltd. (OCBC), said in a separate Dec. 8 report that the likely 25-bp BSP rate cut on Thursday is supported by a “benign inflation backdrop against still constrained growth conditions.”

“Indeed, the BSP noted following the November CPI [consumer price index] print that the outlook for domestic demand had weakened and that the risks to the inflation outlook remain limited,” according to OCBC Global Markets Research & Strategy.

The inflation rate eased to 1.5 percent year-on-year last month, bringing the end-November average to 1.6 percent—below the two- to four-percent target range of manageable annual price hikes deemed conducive to economic growth.