The Bangko Sentral ng Pilipinas (BSP) is striking a carefully ambiguous tone ahead of its 19 February 2026 policy meeting, offering little clarity on its next move even as both inflation and economic growth remain weak. Inflation slowed to 2 percent in January, comfortably within the BSP’s forecast range and below the midpoint of its target. The central bank says price pressures remain “benign” and inflation expectations are well anchored, with inflation projected to stay within the 2–4 percent target band through 2026 and 2027.
At the same time, the BSP acknowledges that the growth outlook has deteriorated further. Business confidence continues to slide, weighed down by governance concerns and uncertainty around global trade policy. While officials point to a gradual recovery in domestic demand—helped by earlier rate cuts and improved public spending—the economy ended 2025 on a notably weak note. GDP grew just 3 percent in the fourth quarter, the slowest pace since 2011 outside the pandemic, pulling full-year growth down to 4.4 percent, well below earlier expectations. The hoped-for boost from easing inflation, election-related spending, and monetary easing failed to materialize.
Against this backdrop, the Monetary Board says the easing cycle is “nearing its end,” but stops short of clearly signaling whether rates will be cut again or held steady. Any further easing, it says, would be limited and strictly data-dependent. This deliberate lack of guidance appears aimed at preserving policy flexibility, but it also leaves markets uncertain about the BSP’s reaction function at a time when growth is underperforming and inflation is no longer a constraint. The key policy question heading into February is whether the central bank prioritizes shoring up a fragile recovery—or pauses to avoid overstimulating an economy still facing structural and confidence-related headwinds.
