THE Bangko Sentral ng Pilipinas (BSP) will likely keep easing this year, Metrobank said on Wednesday, with 50 basis points of cumulative cuts bringing the policy rate to 4.0 percent by the end of 2026.
Easing inflation, coupled with subdued domestic demand and weak sentiment, has given the central bank room to push borrowing costs lower, the bank said in a statement.
“Within-target inflation, together with still-soft economic activity and subdued consumer and investor sentiment should provide leeway for the BSP to reduce the policy rate further to its terminal rate,” Metrobank said.
The BSP has so far cut key interest rates by 200 basis points since August last year, with the latest a 25-basis-point reduction last December.
Metrobank said the easing path was anchored on inflation dynamics that remain broadly supportive. After settling below the BSP’s 2.0- to 4.0-percent target range last year at 1.7 percent, inflation is expected to move back within target in 2026, largely due to base effects.
The bank expects inflation to average 3.3 percent in 2026 and 3.0 percent in 2027.
The expected rate cuts will also widen the interest rate differential between the BSP and the US Federal Reserve (Fed) to around 125 basis points by end-2026, with the US central bank also seen continuing its own easing cycle.
Metrobank said global conditions were gradually turning more constructive after a volatile 2025 marked by policy uncertainty in the United States, a government shutdown and weakening investor confidence.
“While inflation is expected to remain above the Fed’s target this year, downside risks to the labor market driven by cautious investor and consumer sentiment are likely to keep policy rate reductions on the table,” it said.
Government spending, which markedly slowed last year following a corruption scandal, is expected to improve in 2026 and help drive an economic recovery.
“As the BSP moves policy rates to neutral in 2026 and the investment environment improves, investment activity is expected to pick up,” Metrobank also said.
“Private consumption should also improve with anticipated increases in direct cash transfers from the government in lieu of the budget initially allocated for public construction,” it added.
“However, gains will likely be capped by still elevated consumer debt levels and weak sentiment stemming from ongoing government controversies.”
Despite lingering external risks and confidence issues, the bank said the overall outlook for 2026 was more favorable.
“Looking ahead, 2026 presents a more constructive backdrop compared with the previous year, supported by easing inflation pressures, a more accommodative policy environment and improving growth prospects,” Metrobank said.
Source: BSP expected to keep cutting
