Philippines Interest Rate Cut Expected What Does it Mean for Entrepreneurs?

Philippines Interest Rate Cut Expected What Does it Mean for Entrepreneurs?

The Bangko Sentral ng Pilipinas (BSP) is expected to cut key interest rates by another 25 basis points (bps) this Thursday, according to analysts. The decision comes amid subdued economic growth and within-target inflation.

Economic Growth Slows Down

The BSP's Monetary Board reduced rates three times last year, totaling a 75 bps cut, as inflation settled within the medium-term goal of 2.0-4.0 percent. However, economic growth has fallen below target for a second consecutive year in 2024.

Analysts' Consensus

According to The Manila Times' survey, 10 out of 11 analysts believe that another 25-bps cut on February 13 is all but assured. Moody's Analytics economist Sarah Tan was the exception, predicting a pause due to uncertainties in the global climate.

Global Climate Uncertainties

Across 2025, we expect monetary policy easing to continue at a more moderate pace. We're looking at two quarter-point rate cuts by December, with the first coming through in the second quarter, Ms. Tan added.

The US Federal Reserve's decision to pause its interest rate cut during its first 2025 policy meeting last month has also contributed to rate cut expectations moderating. The global climate uncertainty is a significant factor in this development.

BSP's Prudent Approach

Central bank Governor Eli Remolona Jr. emphasized the need for a measured approach to ensure price stability conducive to sustainable economic growth and employment. This stance is reflected in the BSP's decision to ease policy at a slower pace than previously expected.

Peso Stability

The recent stability of the peso, following the US government's decision to postpone its tariffs against Canada and Mexico, has also provided room for the BSP to consider a rate cut. Pantheon Macroeconomics chief emerging economist Miguel Chanco notes that improving market sentiment may mitigate any potential pressure on the peso.

Conclusion

In conclusion, another 25-bps interest rate cut is expected by analysts given subdued economic growth and within-target inflation. The BSP will likely maintain a prudent approach to policy easing, considering factors such as global climate uncertainties and peso stability. As entrepreneurs in the Philippines, it's essential to stay informed about these developments and adjust your business strategies accordingly.

What's Next?

The Monetary Board's next rate-setting meeting this year will be on April 3, followed by meetings on June 19, August 28, October 9, and December 11.

Edward Lance Arellano Lorilla

CEO / Co-Founder

Enjoy the little things in life. For one day, you may look back and realize they were the big things. Many of life's failures are people who did not realize how close they were to success when they gave up.