BSP keeps tightening bias, but 2027 easing path emerges

From AB Capital's The Opening Bell: Three Moves

Event

The Bangko Sentral ng Pilipinas (BSP) kept further rate hikes on the table after lifting the policy rate to 5.0%, while its low inflation scenario opens room for cuts in 2027. Around 70% of surveyed analysts still expect another 25-75bp of tightening this year before easing begins next year.

View

We think the 2027 easing signal is conditional rather than a firm policy pivot. The BSP is effectively saying that cuts become possible only if inflation falls faster than its central forecast and moves closer to the 3% target, while weak growth and a wider negative output gap persist.

Catalyst

A faster move toward the 3% target by 2Q27 could bring forward easing, while sticky oil, wages or El Niño would keep rates higher for longer. Every additional 25bp hike would further tighten domestic demand at a time when gross domestic product (GDP) growth is already weak.

Action

In our view, the near-term environment still favors rate-sensitive defensives and banks with stronger funding franchises rather than broad cyclical beta. Our base case remains one more 25bp hike this year, with a more durable market rerating likely once a credible 2027 easing cycle comes into view.

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