November 13, 2025 | 12:00am
More interest rate cuts
MANILA, Philippines — A more accommodative monetary policy would support economic growth in the Philippines, but it also carries risks to stability, a New York-based think tank said.
In a report released yesterday, GlobalSource Partners country analyst Diwa Guinigundo – a former Bangko Sentral ng Pilipinas deputy governor – said economic growth, which slowed markedly in the third quarter to four percent, coupled with steady headline inflation in the last two months “strengthens the case for the BSP to sustain a monetary accommodation stance through late 2025 and possibly into early 2026.”
The third quarter economic growth marked a sharp slowdown from the previous quarter’s 5.5 percent expansion and the 5.2 percent growth in the same period last year.
The latest gross domestic product growth print brought average growth in the January to September period to five percent, falling below the government’s full-year target of 5.5 to 6.5 percent for the year.
Meanwhile, inflation held steady at 1.7 percent in October from the previous month as food prices rose at a slower pace.
Average inflation from January to October was also at 1.7 percent, lower than the government’s two to four percent target for the year.
Last month, the BSP cut the key policy rate by 25 basis points to 4.75 percent.
Department of Economy, Planning and Development Secretary Arsenio Balisacan said the economy could benefit from further reduction in interest rates.
While continued monetary easing is expected to boost growth, Guinigundo cited the need to take a cautious stance, given mounting domestic political uncertainties and governance issues in relation to flood control projects that have heightened market volatility.
“These developments, alongside weak equity performance, declining foreign investments and a fragile peso, complicate the BSP’s policy calculus,” he said.
He flagged risks such as capital outflows, a weakening peso and inflationary pressures.
A lower interest rate could drive investors to look for higher-yielding investments elsewhere and reduce demand for peso-denominated assets.
As a result, a weak local currency could drive up inflation by raising the cost of imports.
“A premature or excessive loosening could thus undermine financial stability,” Guinigundo said.
“In this environment, a measured pause in policy rates could send a constructive signal – that the BSP remains data-driven, vigilant and risk-conscious, choosing to balance growth support with the need to preserve macroeconomic credibility and market confidence,” he added.