November 14, 2025 | 12:00am
MANILA, Philippines — The Bangko Sentral ng Pilipinas is unlikely to implement a 50-basis-point rate cut despite the weak third-quarter growth, since a larger reduction could send the wrong signal and could signify a weak peso, according to Bank of the Philippine Islands (BPI) president and CEO Jose Teodoro Limcaoco.
Pointing out that veering from the traditional 25-basis-point cut would be drastic, Limcaoco said it is also important to watch the actions of the US Federal Reserve prior to adjusting the benchmark interest rate.
“I personally don’t think we would do a 50-basis-point cut,” he told reporters. “It’s drastic. It might send the wrong signal. And you have to look at what the Federal Reserve is doing because if you cut significantly faster than the Fed, that means a weak peso.”
Last October, the BSP reduced its benchmark interest rate by 25 basis points, citing weak domestic demand and concerns over governance issues in public infrastructure spending.
The move brings the total policy rate cuts to 175 basis points since August 2024, as the central bank continues to adjust monetary settings to strike a balance between curbing inflation and supporting economic recovery.
When asked if the BSP is expected to intervene on the peso, Limcaoco said the intervention depends on monetary policy, noting that the central bank may act if a weak peso fuels inflation.
“It’s up to them. They’re responsible for monetary policy, and monetary policy means keeping prices steady,” he said. “If they believe that a weak peso might be inflationary, then they might.”
Limcaoco expressed optimism about the banking sector in 2026 and expects continued growth in loan volumes, noting that the Philippine economy is still expanding and on an upward trajectory, although not as fast as it has been.
He previously told reporters that the country’s economy is expected to grow by five percent in 2026.
Meanwhile, the bank’s lead economist, Jun Neri, said shifts in US and Chinese policies are challenging the Philippines with export headwinds, weaker remittances and BPO disruptions from AI, while offering opportunities in manufacturing and supply chains.
“Philippine economy is growing, but not enough to close the economic gap with other countries. The gross domestic product (GDP) per capita of the Philippines is lower compared to other economies in the region,” he said.
Neri noted that at the current growth rate, it would take the Philippines two years to catch up with Vietnam’s GDP per capita, four years with Indonesia, 14 years with Thailand, 26 years with Malaysia and 70 years with Singapore.
To close the gap, Neri said that the country needs structural reforms, which include improvements in production in the agricultural and manufacturing sectors, as this will put the economy on a more independent footing.
“Excessive rate cuts could lead to an overshoot, as monetary policy might be used disproportionately to compensate for weaker growth performance,” Neri said.
“While inflation is expected to remain manageable in the coming months, there is a significant chance it will move higher in 2026 as favorable base effects from rice prices fade,” he added.