Private sector economists are forecasting a more aggressive easing cycle from the central bank as cooling inflation landscape and moderating economic growth provide the monetary authority room to lower borrowing costs.

Bank of the Philippine Islands (BPI) and Metropolitan Bank & Trust Co. (Metrobank) are leading the dovish shift among private sector analysts. They expect the Bangko Sentral ng Pilipinas (BSP) to push its benchmark rate below the current 4.5 percent level in the coming months.

The outlook comes as price pressures remain largely contained, despite the slight uptick in December, and as the government grapples with economic expansion that has yet to regain its full momentum.

“We see the scope for additional rate cuts from the Bangko Sentral ng Pilipinas (BSP) in the coming months, given the favorable inflation outlook, with two cuts in the first half of 2026,” said Emilio S. Neri Jr., senior vice president and lead economist at BPI.

While Neri anticipates the easing cycle will conclude this year, he noted that the lagged effects of previous rate cuts should continue to bolster the economy without requiring the central bank to resort to emergency levels of stimulus.

Metrobank also shared a similar sentiment, noting that lackluster domestic demand and dampened business sentiment have weighed on gross domestic product (GDP).

The Ty-led lender has priced in the cumulative 50 basis points of easing for 2025, which would see the policy rate settle at four percent. This “terminal rate” is seen as the point where the central bank balances its support for growth against the risk of reigniting price pressures.

The dovishness is not universal, however. Analysts at HSBC Holdings Plc and China Banking Corp. expect further easing but are maintaining a more cautious tone.

Chinabank said in a Jan. 6 report that while the improved inflation outlook allows the BSP to offer more support to the economy, the pace may be measured.

Meanwhile, Aris Dacanay, HSBC economist for Southeast Asia, noted that the 1.8 percent inflation print in December 2025 does not derail the broader trend of stabilization.

He pointed out that remaining pressures are concentrated in volatile food items, such as vegetables, which should normalize as supply conditions improve.

HSBC expects the United States (US) Federal Reserve to hold its benchmark rate steady between 3.5 percent and 3.75 percent throughout the year. Under this scenario, Dacanay expects the BSP to deliver one final 25-basis-point cut in the first quarter of 2026, bringing the local benchmark to 4.25 percent.

He acknowledged, however, that if the US labor market weakens and forces the Fed to cut more aggressively, the BSP would have even more room to maneuver.

In contrast, United Overseas Bank Ltd. suggested the central bank may be approaching a temporary pause. Economists Julia Goh and Loke Siew Ting pointed to recent remarks by BSP Governor Eli Remolona Jr., who signaled that the policy rate is nearing its desired level.

UOB expects the BSP to hold steady at 4.5 percent through the first quarter before a final quarter-point cut in the second quarter, depending on GDP performance and leadership transitions at the Federal Open Market Committee.

The central bank remains on guard against potential reversals. UOB raised its 2026 inflation forecast to three percent from 2.5 percent, citing potential tariff hikes, higher rice import duties, and weather-related disruptions.

BPI’s Neri also warned that a weakening peso and a “substantial” trade gap could reignite inflation if the central bank becomes overly accommodative.

“The risk of higher inflation in the coming years also warrants caution, as an overly accommodative stance could eventually force the BSP to raise rates more aggressively than would otherwise be ideal,” Neri stressed.