British banking giant HSBC believes the disappointing economic expansion in 2025 will outweigh price pressures, as it sees the Bangko Sentral ng Pilipinas (BSP) proceeding with a quarter-point cut in its key interest rate at the upcoming Feb. 19 policy meeting.
Aris Dacanay, HSBC economist for the Association of Southeast Asian Nations (ASEAN), wrote in a Feb. 5 commentary that January’s higher inflation rate of two percent “has made the path to further rate cuts rougher.”
This price movement aligns with the BSP’s forecast of up to 2.2 percent and remains within the government’s two- to four-percent annual target band. Dacanay noted that inflation has been accelerating faster than expected over the past two months.
“Cognizant of this risk, we still think the BSP will likely cut its policy rate in February, since we expect growth concerns to outweigh inflation when deliberating monetary policy,” Dacanay said.
Economic growth sharply slowed to three percent in the fourth quarter of 2025, pulling full-year growth to an average of 4.4 percent, which—excluding the pandemic years—marks its slowest expansion since 2011.
To date, the BSP has reduced key borrowing costs by 200 basis points (bps) to 4.5 percent from its peak of 6.5 percent prior to the start of its inflation-targeting easing cycle in August 2024.
“If the BSP were to decide to pause its easing cycle, we think it would only be a postponement of easing, not a complete derailment,” Dacanay said.
“Nonetheless, we continue to believe that a quarter-point rate cut to 4.25 percent is still in the pipeline, with growth concerns eventually outweighing inflation,” the economist added.
Similarly, Metropolitan Bank & Trust Co. (Metrobank) has penciled in another 25-bp reduction in the benchmark rate in February, as the January inflation print sits comfortably at the lower end of the government’s target band.
“While inflation is moving higher from recent lows, it remains well-anchored within the central bank’s target,” Metrobank said in a Feb. 6 commentary. This, the bank said, provides monetary authorities with room to continue supporting the economy through policy easing.
“Metrobank expects the BSP to proceed with further monetary easing. The bank forecasts a cumulative 50 bps of policy rate cuts in 2026,” the lender said. If adopted, this would bring the benchmark rate to four percent.
“Barring major supply-side shocks, the current inflation environment supports a measured and data-driven policy path—one that allows the economy to gain momentum without reigniting excessive price pressures,” Metrobank said.