The Bangko Sentral ng Pilipinas (BSP) is expected to cut its key interest rate by 25 basis points to 4.25 percent at its February 19 policy meeting, according to Metrobank, as slowing economic growth takes priority over near-term inflation concerns.
Economic activity weakened sharply in the fourth quarter of 2025, with output growth measured as the gross domestic product (GDP) expanding by just 3 percent, bringing full-year growth to 4.4 percent. The slowdown was mainly caused by softer household spending and lower private investment — two major drivers of the Philippine economy.
Metrobank said a rate cut could help revive growth by encouraging borrowing and spending. Lower interest rates typically reduce loan costs for businesses and households, making it cheaper to invest, expand operations, or finance major purchases such as homes and vehicles.
For businesses, a rate reduction could ease financing costs and improve cash flow, particularly as demand has softened. For households, lower rates may translate to more affordable loan repayments, offering relief amid higher utility expenses.
Inflation remains manageable. Consumer prices rose slightly to 2 percent in January from 1.8 percent in December, largely due to higher utility costs, while food inflation continued to ease. Inflation is still within the BSP’s 2 percent to 4 percent target range, giving the central bank room to support growth without immediately risking price instability.
Metrobank noted that although a rate cut would narrow the interest rate gap between the Philippines and the United States, currency movements are likely to depend more on overall business and consumer confidence than on rate differences alone.
Further rate cuts remain possible in the coming months if inflation stays under control. However, rising rental and utility costs could limit additional easing.
With growth slowing and inflation contained, analysts say the BSP faces a timely opportunity to provide support to businesses and households, while carefully balancing price stability and financial market conditions.
