The central bank’s pivot toward monetary easing may be insufficient to arrest the deepening economic slowdown unless the Marcos administration addresses systemic governance failures and provides clearer policy roadmap, according to Moody’s Analytics.

In a commentary, the New York-based think tank warned that the Bangko Sentral ng Pilipinas (BSP) is reaching the functional limits of its policy toolkit.

While lower borrowing costs are intended to cushion the economy, Moody's argued that restoring dampened consumer and business sentiment requires more than just cheaper credit.

“Rate cuts may contain the slowdown, but it will take greater transparency, stronger governance, and credible policy direction to restore confidence,” Moody’s said.

“For this reason, the easing cycle is likely nearing its limit,” Moody’s said. The BSP delivered its latest policy easing last week, cutting the rate to 4.25 percent from 4.5 percent previously and dropping its hawkish signal that the easing cycle was nearing its end.

BSP Governor Eli Remolona Jr. said that while the central bank is doing its part to lower borrowing costs, interest rate cuts alone cannot compensate for the structural issues that triggered the sharp economic slowdown in 2025.

“We have very limited tools in monetary policy. We’re at the point where monetary policy cannot do much more,” Remolona said.

Last week, the BSP lowered the benchmark rate to cushion an output slump that the central bank had previously failed to anticipate. This followed the disappointing three-percent growth in the fourth quarter of 2025, which brought the key interest rate to 4.25 percent.

“Much of the recent softness reflects deteriorating business and consumer confidence amid a controversy over the misuse of government funds for flood control projects,” Moody’s said.

“With inflation subdued, the bank had room to prioritize growth without jeopardizing price stability,” Moody’s added. The BSP raised its inflation forecasts, now expecting average price growth of 3.6 percent in 2026 and 3.2 percent in 2027. Remolona earlier said inflation moving above three percent would be a cause for concern.

Further, the BSP tweaked its output growth outlook, cutting its 2026 gross domestic product (GDP) forecast to 4.6 percent and its 2027 projection to 5.9 percent.