Slowing economic momentum is likely to take center stage in the Bangko Sentral ng Pilipinas’ (BSP) upcoming monetary policy meeting on February 19, with Metrobank expecting a 25-basis-point rate cut to help support domestic growth.
Metrobank forecasts that the Monetary Board will reduce its key policy rate by 25 basis points to 4.25% at its next policy meeting, as softer economic conditions outweigh near-term inflation concerns.
Latest data show that economic expansion moderated sharply in the fourth quarter of 2025, with gross domestic product (GDP) growing by just 3%. This brought full-year growth to 4.4%.
The slowdown was largely driven by weaker household spending and subdued private investment, both of which remain critical engines of the Philippine economy.
“Household expenditure continues to face headwinds, and this softness in domestic demand strengthens the case for monetary easing. A timely rate cut could provide the necessary support to reinvigorate growth momentum,” Metrobank said in its latest market outlook published on Wealth Insights.
While economic activity is expected to gain traction in the second half of 2026, Metrobank noted that near-term vulnerabilities warrant a proactive response from the central bank.
Inflation within target, room to ease
Inflation, meanwhile, remains manageable despite a slight uptick at the start of the year. Consumer prices rose to 2% in January from 1.8% in December, driven largely by higher utility costs, even as food inflation continued to ease.
Metrobank expects inflation to trend higher toward the lower end of the BSP’s 3±1% target range this year, partly due to base effects from last year’s low readings. However, the resumption of rice imports is expected to temper price pressures.
“With inflation firmly within the target range, the BSP retains room to recalibrate policy in favor of growth,” the bank said.
Balancing rates and currency stability
A 25-basis-point reduction would narrow the policy rate gap between the Philippines and the United States to 50 basis points. While a tighter interest rate differential could influence capital flows, Metrobank believes currency movements may hinge more on business and consumer confidence than on rate spreads alone.
Looking ahead, the bank noted that further easing in April remains possible if inflation stays subdued. However, sustained increases in rental and utility prices could limit additional cuts.
“Monetary policy remains data-dependent,” Metrobank said. “While supporting growth is the immediate priority, the BSP will continue to balance price stability and financial market considerations in the months ahead.”
As the central bank prepares to meet, market participants will closely watch whether policymakers choose to provide relief to a cooling economy while inflation remains contained—an opportunity that may be narrow but timely.
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