BPI’s Limcaoco expects central bank to extend easing cycle until early next year

THE BANGKO SENTRAL ng Pilipinas (BSP) is expected to continue its easing cycle until next year to support economic activity and as inflation remains low.

Bank of Philippine Islands (BPI) President and Chief Executive Officer Jose Teodoro K. Limcaoco said they expect the central bank to deliver another rate cut in the first quarter of 2026 along with the two reductions they expect for the remainder of this year.

“We think there’s potentially another cut in the first quarter, which is good for the economy, right? It shows that the BSP has been doing its job correctly, inflation is under control and they’re now doing this to continue to stimulate the economy,” Mr. Limcaoco said. “This is the right thing to do.”

“If you look at where we’re going, it seems that the forecast is two cuts this year, and we’re beginning to think that there might be a third cut early next year. But… I don’t know whether it stops there because it depends on what happens in the US, [and]… whether they cut aggressively. It’s so hard to tell. So, what you do as a bank is you just forecast and see as far as you can forecast, and you plan your lending and your borrowing strategies based on that.”

A ����ý poll conducted last week showed all 20 analysts surveyed expect the Monetary Board to cut the target reverse repurchase rate by 25 basis points (bps) to 5% on Thursday. If realized, this would be the third straight 25-bp reduction since April.

The BSP has lowered benchmark borrowing costs by a cumulative 125 bps since it began its easing cycle in August 2024.

BSP Governor Eli M. Remolona, Jr. has likewise signaled two more cuts this year, including the one “quite likely” to be delivered on Thursday. He earlier said they are open to further cuts in 2026 depending on the data.

After this week’s meeting, the Monetary Board is scheduled to conduct two more policy reviews in October and December.

Meanwhile, financial markets still broadly expect the Fed to cut its benchmark interest rate by a quarter of a percentage point to the 4%-4.25% range at its Sept. 16-17 meeting, with futures markets on Tuesday placing an 86% probability on that outcome, Reuters reported.

After the September meeting, markets are split on whether the Fed can deliver as much as 50 bps in additional easing by the end of this year. Investors generally took the Fed’s Lisa Cook developments in stride.

The Fed last lowered rates in December last year, delivering a 25-bp reduction after it kicked off its own easing cycle with a jumbo 50-bp cut in September. – K.K. Chan