FURTHER MONETARY POLICY easing might come as early as the Monetary Board’s first meeting for 2026 amid subdued inflation and dismal economic growth last year, the Bangko Sentral ng Pilipinas (BSP) said.
Asked about the likelihood of a February cut, BSP Governor Eli M. Remolona, Jr. said: “(It’s) on the table. Unlikely pero puwede naman (but we could deliver it).”
Mr. Remolona said that the latest December inflation print of 1.8% is a “reasonably low rate,” even as it quickened from 1.5% in November. Year on year, it slowed from 2.9% in December 2024.
Philippine economic growth in 2025 also likely fell below the government’s target, he added.
“I can say that we’re very close to where we want to be in terms of policy,” he told journalists in Mandaluyong City. “There’s a chance that we may cut some more, and there’s also a chance that we may not move at all. But there’s not a lot of probability that we will raise in 2026.”
The Monetary Board ended last year with a fifth straight 25-basis-point (bp) cut at its Dec. 11 meeting, bringing the key policy rate to its lowest in over three years at 4.5%.
It has so far delivered 200 bps in total cuts since it began its easing cycle in August 2024.
The central bank chief said the country’s gross domestic product (GDP) may have expanded by 4.6% last year as the flood control corruption scandal continued to drag consumer and investor confidence.
This would be below the government’s 5.5%-6.5% target for the year and also lower than the Development Budget Coordination Committee’s (DBCC) latest projection of 4.8%-5%.
“There was a loss of confidence of investors. So, investments came down. Consumption also came down,” Mr. Remolona said.
“When you realize that your taxes are not really going into infrastructure spending, masakit ’yon eh (that’s painful)… It’s more painful when you know it’s going to the wrong guys. So, that has a big effect,” he added.
In the third quarter, GDP growth slumped to an over four-year low of 4% amid allegations that Public Works officials, lawmakers and private contractors received kickbacks from anomalous flood control projects.
Economic managers have since conceded that the economy likely failed to meet the government’s growth target for 2025.
Meanwhile, the BSP has repeatedly said following its December meeting that further easing is now limited and would depend on economic developments in the country.
Mr. Remolona said they may only deliver two 25-bp cuts if growth slows to below 5% this year due to weak demand.
“If we cut two more times, medyo ibig sabihin nu’n, things are worse than we thought (that might mean that things are worse than we thought). So, that would require a bad surprise in the data,” Mr. Remolona said.
“If growth is much slower than we anticipated. We’re saying that for 2026, growth will be 5.4%. If it goes below 5%, then there’s ground for one more cut beyond the 25 bps,” he added.
For 2026, the central bank sees GDP growth averaging 5.4%, noting that the economy will likely remain sluggish in the first half before picking up in the second half.
“Mahaba pala ’tong impact eh ’yung loss of confidence (The impact of the loss of confidence may be prolonged)… it will continue through the first half of 2026,” Mr. Remolona said, noting that a 5.4% growth is “not bad” considering the flood control scandal.
The DBCC on Monday revised its growth target for this year to 5-6% from the 6-7% goal previously.
Economic growth may further improve to 6.2% in 2027, the BSP chief added, settling near the upper bound of the administration’s 5.5%-6.5% revised goal.
The Monetary Board is set to have its first policy meeting this year on Feb. 19. — Katherine K. Chan