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Risks arising from inflareduce the power of the Philippine Central Bank of Show more in 2026 despite the exDirect economic decline, Analysts say.
John Paolo R. Rivera, a senior researcher at the Philippine Center for Toventue Study, said another 25 point) cut in the central bank by 2026 will not be attackedefice to boost the economy.
“The final 25-BP cut will help the Margin, but it may not be enough by itself to lift growth when the fourth quarter (growth) comes around 3.8%,” he told Businessworld in a viber message.
Last week, Bangko Sentral ng Pilipinas (BSP) governor Eli Pipipinas (jr.) said Gross Domestic Product (GDP) growth in the fourth quarter may remain at 3.8%, down from 4% in the third quarter.
If realized, it would be a much slower growth rate from 3% in the third quarter of 2011 and bring the full-year expansion to 4.7%, below the Government’s target of 5.5-6.5%.
However, Mr Rivera said the current central bank cycle is likely to end soon as food prices and the weakness of the peso put a high level of weakness.
“By standing in the area of reduction, the BSP may have limited space,” he said. “With growth projected to remain below target but upside risks remain (from food prices and the (Peso)’s devaluation), the BSP should balance growth support with price and financial stability.”
ANZ Christian Economist for Southeast Asia and India Sanjay Mathur and Economist Arindam Chakraborty noted that the recent performance of the peso against the dollar is not affected by inflation
“In our view, subdued growth and inflationary expectations suggest room for further rate cuts,” it said in a note released late Thursday. “We expect another 25-BP rate cut in Q1 2026, bringing the final policy rate to 4.25%.”
The peso has hit p59 per-dollar several times since November, even hitting a low of P59.22 against the greenback on December 9.
The monetary board last week cut borrowing costs for the fifth straight meeting key by 25 bps to a three-year low of 4.5%, citing reduced inflation. It has brought so far a total of 200 bps in cutting since it started Its light cycle is in August 2024.
Mr Remolona has previously said they may increase their rate cut cycle to the final 25-BP cut in 2026 if economic figures turn out to be worse than expected.
Entering Chief Economist and Regional Head of Asia-Pacific Research Deepali Bhargava said the BSP could allow the BSP to reduce this and warned that currency rates could rise if prices fall below expectations.
“Inflation should remain within the central bank’s target for 2026, allowing for rate-cutting cycles to continue … the Philippines … and support the easiest monetary environment in the region,” the statement said.
“However, concerns that if inflation were to worsen expectations, real estate prices could rise again, creating a more challenging environment for business investment and consumer demand.”
Heandline inflation fell to 1.5% in November from 1.7% in the previous month and 2.5% in the same month last year, bringing prices down to 1.6% for 1 month.
Ing expects inflation to return to within 2-4% of 2-4% next year to 3%, a tad slower than the 3.2% BSP forecast.
Citi Research said the Central Bank may ease further in 2026 as the rise of powerless Filipinos could dampen consumption and inflation.
“With a cool job market likely to drag down consumption and lower prices, we still expect a final 25-BP cut to 4.25%,” said one earnings release on the 25th.
The country’s unemployment rate rose to a national high of 5% in October from 3.8% in September and 3.9% in the same month last year.
Dominance
At the time, analysts said the economy would need fiscal and monetary governance reforms on top of a full recovery monetary policy.
“Gradual cuts can surprise you,” Jonathan L. Ravelas, senior consultant at Reyes Tacandong & Co, told Businessworld Via Viber. “Real growth will come if (a) government accelerates governance, fiscal discipline, and sectors. Apart from this, the impact remains limited within the politicalnoise anxiety and hallucinations. “
Reinilielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., also noted that the recent recovery of the stock market is also not enough to establish slow spending and seek investor confidence.
“Despite the recovery in the financial market and the recent short notices, these factors have been enough to offset the decline in government spending and investor sentiment,” he said in a Viber message. “A large part of GDP is government spending, so a reduction in this sector will have a significant impact on growth rates.”
On Friday, the Philippine stock exchange index rose by 0.78% or 46.72 points to end at 6,086.72. Week after week, it woke up with 87.5 points from 5 949.22 closed on December 5.
“The BSP can release money from the financial system, cut interest rates, but if the financial sector is tight, economic growth can only go so far,” he added.
President Ferdinand R. Marcos, JR. He previously vowed to increase government spending in the fourth quarter in a bid to support economic growth.
