Despite pronouncements from the Bangko Sentral ng Pilipinas (BSP) indicating a forthcoming end to its monetary policy easing cycle, sluggish economic growth remains a risk that could entail more interest rate cuts next year, according to investment banking giant Goldman Sachs.

In a Dec. 11 report obtained by Manila Bulletin, Goldman Sachs Economics Research said it is keeping its forecast of another 25-basis-point (bp) rate cut in the first quarter of 2026, lowering the policy rate to 4.25 percent on the back of a “weaker domestic growth outlook, and our more dovish US Fed [United States Federal Reserve] outlook than market pricing.”

“We see risks of further easing in 2026, if growth continues to remain muted,” Goldman Sachs said, even as it noted that the BSP’s forward guidance “turned less dovish” following the Monetary Board’s (MB) final meeting on the policy stance for 2025 last Thursday, Dec. 11, which saw a 25-bp reduction in the key interest rate to 4.5 percent.

While the MB sees the monetary policy easing cycle nearing its end, Goldman Sachs noted that BSP Governor Eli M. Remolona Jr. did not discount the possibility of an additional rate cut if the growth outlook deteriorates further.

Global banking giant Citi said in a Dec. 12 report that it expects the BSP to cut a “final” 25 bps in February 2026, “with still some (albeit reduced) risk of a further 25-bp cut” due to a “cooling job market possibly dragging down consumption and inflation.”

Also, while “policymakers seemed comfortable with the current differential between the BSP rate and the Fed funds rate,” Citi thinks that “further Fed cuts would facilitate more easing by the BSP should domestic conditions remain soft.”

For Citi, the post-pandemic-high unemployment rate of five percent in October—driven by job losses among formally employed and consumer-facing sectors—may signal governance-related spillovers that could dampen demand and, alongside delayed public investment, lead to growth and inflation undershooting BSP expectations, supporting a base-case rate cut in February next year.

“With regard to the possibility of another 25-bp cut in April [2026], this remains a risk scenario rather than a base case in our view—as at least some signs of a spending recovery may have emerged by then,” Citi said.

As for Japanese financial giant MUFG Bank Ltd., its Global Markets Research team said in a Dec. 12 report that “we forecast one more rate cut and an extended pause by the Philippines’ central bank,” bringing the terminal rate to 4.25 percent early next year.

Last Friday, Dec. 12, Remolona cautioned against jumbo interest rate cuts of up to 50 bps moving forward, saying this could signal desperation on the part of monetary authorities and further erode confidence.

This was despite the BSP’s grimmer outlook for the fourth quarter of 2025, with an emerging gross domestic product (GDP) growth forecast of only 3.8 percent for the period—much slower than the already 4.5-year low of four percent during the third quarter, in the aftermath of the flood-control corruption scandal.

“If we go to 50 bps or implement an off-cycle cut, it could worsen the loss of confidence, as people may perceive the BSP as desperate,” Remolona said.