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The Bangko Sentral ng Pilipinas (BSP) is expected to immediately follow through on last week's 25-basis-point (bp) cut in key interest rates with a similar reduction at its next policy meeting on June 19.
"For now, we maintain our view for the BSP's next 25-bp rate cut in June, but it remains 'live' given the rapidly evolving external environment," said Junjie Huang, Deutsche Bank Research's economist for the Philippines, in an April 11 report sent to journalists on Monday, April 14.
The BSP resumed its monetary policy easing cycle—which had been temporarily paused in February amid heightened global economic uncertainties—citing tempered domestic inflation expectations and risks posed globally by United States (US) President Donald Trump's tariff spree.
"The central bank noted the more challenging external environment, which prompted their shift to a 'more accommodative policy stance,'" Huang said.
He further noted that the BSP's risk-adjusted inflation forecast for this year was sharply lowered to 2.3 percent from 3.5 percent previously, mainly due to expectations of declining global commodity prices.
Huang also cited BSP Governor Eli M. Remolona Jr.'s pronouncement that the Monetary Board (MB)—the central bank's highest policy-making body—expects the US Federal Reserve to cut key interest rates by 75 to 100 bps in 2025, which was "somewhat more dovish" than the MB's current stance.
"We think this could translate to another 25 to 50 bps in cuts this year, which in the MB's view would complete this easing cycle," according to Huang.
Deutsche Bank Research said earlier that further BSP rate cuts are necessary to address the projected wider negative output gap—an indicator that actual economic output is falling short of the economy's full capacity—resulting from the global trade impact of Trump's tariffs.
Following the MB's April 10 rate-cut decision, Remolona said the BSP is hopeful that monetary policy, as its main tool, would help narrow the negative output gap.
