The Bangko Sentral ng Pilipinas (BSP) is expected to continue reducing policy rates in the second half of the year as easing inflation provides ample room for more policy rate cuts, BMI, a unit of Fitch Solutions said.

In a report released Thursday, BMI said low inflation and slow growth would prompt the BSP to ease further in the second half, bringing the benchmark policy rate to 4.75 percent by the end of this year.

Inflation eased to a nine-year low of 0.9 percent in July this year.

BMI projects inflation to settle at 1.6 percent this year, down from its earlier 2.2 percent forecast.

Economic growth, however, settled at 5.4 percent in the first quarter of the year and slightly picked up to 5.5 percent in the second quarter.

"We expect the Bangko Sentral ng Pilipinas (BSP) to maintain a pro-growth policy stance in H2 (second half) 2025 amid growing economic uncertainty," BMI said.

BMI believes that despite further rate cuts, "the peso will strengthen slightly from current levels as the evolving situation in the US weighs on the dollar."

"We expect that the currency will end the year a touch stronger than the current spot rate of P57.22 per US dollar as there remains the risk that investor confidence in the US dollar may weaken further," BMI said.