BSP likely to cut rates in April – Moody’s unit

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is likely to resume its easing cycle by cutting borrowing costs at its April meeting, after opting to keep its policy rate unchanged last week, according to Moody’s Analytics.

Speaking in an interview on Money Talks, Moody’s Analytics economist Sarah Tan said the BSP’s decision to pause was not unexpected given lingering uncertainties in the global economy, particularly the potential impact of US tariff threats.

However, she noted that with inflation still within the two to four percent target and economic growth slightly below the government’s expectations, a rate cut is likely sooner rather than later.

“We don’t expect the pause to be for very long. In fact, the next rate cut could come as early as April 3, which is the next time the Monetary Board will meet,” Tan said.

Despite optimism over policy easing, Tan warned that inflation remains the biggest risk for the Philippine economy, driven by both domestic and external factors.

“Domestically, the risk is that food inflation remains elevated due to frequent weather disruptions that could hurt supply,” she said.

“Externally, we worry that US tariffs could cause global inflation to rise due to disruptions in supply chain networks,” she added.

According to Tan, resurgence in inflation beyond the BSP’s target could delay the timing and magnitude of potential rate cuts.

This could in turn weigh on private consumption – the main driver of Philippine economic growth.

“If borrowing costs and inflation stay higher for longer, that will be a recipe for further weakening in private consumption, and that’s not great for the economy,” Tan said.

The reciprocal tariffs from the US will also have a limited direct impact on the Philippines.

“The Philippines is unlikely to be high on (US) President (Donald) Trump’s list,” she said. “But if there’s a universal reciprocal tariff imposed, that could hurt the Philippines because duties on US imports into the Philippines are higher than the other way around.”

Such a scenario will make Philippine exports to the US more expensive and less competitive, posing a risk to manufacturers and exporters.

“That’s worrying because the US is the Philippines’ largest export destination,” Tan said.

With the mid-term election campaign in full swing, Tan said increased spending on campaign-related goods and services will likely provide a boost to the economy. However, she cautioned that stronger demand could also drive inflation higher, posing a challenge for the BSP.

“So I still believe it was too soon to cut rates in February, and I believe the next cut will come in April,” Tan said.

Beyond interest rates, Tan expects the BSP to adjust its reserve requirement ratio soon, possibly before the next policy meeting.

“There are many ways the central bank can help support the economy, and an RRR cut is one of them,” she said.