Easing inflation and slow economic growth provide more room for the Bangko Sentral ng Pilipinas (BSP) to further reduce policy rates during the Monetary Board's (MB) next meeting, an economist said.

In a Viber message Monday, Rizal Commercial Banking Corporation chief economist Michael Ricafort said the MB would likely continue its easing cycle on Aug. 28, reducing policy rates by another 25 basis points.

"Local monetary officials recently signaled possible 50 [basis points] local policy rate cuts for the rest of the year and a possible cut in banks' RRR (reserve requirement ratio) in 2026 amid still benign inflation environment despite the recent tensions between Israel and Iran amid global risk factors that could slow down global economic growth that could indirectly slow down local economic growth, thereby warranting accommodative monetary policy measures to boost economic growth, as a policy priority," Ricafort said.

Ricafort, however, said that the relatively benign inflation at 1 to 2 percent is still possible for the rest of 2025, which could justify future local policy rate cuts. Inflation has so far decelerated to a nine-year low of 0.9 percent in July.

Ricafort is expecting 2025 inflation to settle at 1.7 percent this year.

"Thus, this could support further BSP rate cuts that could match future Fed rate cuts for the rest of 2025, consistent with signals from local monetary officials," he said. 

PNA PHOTO