Metrobank Predicts BSP Rate Reduction to Support Economic Growth
In a recent market outlook published on Wealth Insights, Metropolitan Bank & Trust Co. (Metrobank) has projected that the Bangko Sentral ng Pilipinas (BSP) will implement a 25 basis point cut in its key policy rate at the upcoming Monetary Board meeting on February 19, 2026. This anticipated move is driven by concerns over slowing economic growth and manageable inflation levels, which together create a compelling case for monetary easing.
Economic Slowdown and Inflation Trends
Metrobank highlighted that the Philippine economy experienced a notable deceleration in the fourth quarter of 2025, with gross domestic product (GDP) growth slowing to three percent. This brought the full-year expansion for 2025 down to 4.4 percent, a figure that underscores the impact of weaker household spending and subdued private investment on overall economic output. The bank emphasized that these softer domestic conditions are outweighing near-term price pressures, reinforcing the rationale for a policy rate reduction to 4.25 percent.
On the inflation front, Metrobank noted that consumer prices remain within the BSP's target band of 3±1 percent, despite a slight increase to two percent in January 2026 from 1.8 percent in December 2025. The uptick was primarily driven by higher utility costs, while easing food prices helped contain broader inflationary pressures. With inflation expected to trend toward the lower end of the target range throughout the year, the BSP retains significant room to recalibrate its monetary policy in favor of stimulating economic growth.
Potential Limitations and Future Outlook
However, Metrobank issued a cautionary note, warning that sustained increases in rental and utility costs could potentially limit further monetary easing beyond the February meeting. If implemented, the rate cut would narrow the interest rate differential between the Philippines and the United States to 50 basis points. Despite this, the bank suggested that currency movements may depend more on factors such as business and consumer confidence rather than rate spreads alone.
Looking ahead, Metrobank indicated that additional easing in April 2026 remains a possibility if inflation stays subdued, underscoring that the BSP's monetary policy will remain highly data-dependent. This perspective aligns with the BSP's recent statement on February 5, 2026, which reiterated that its monetary easing cycle is "nearing its end," as domestic demand is expected to improve following a series of policy rate cuts initiated since 2024.
Historical Context of Rate Cuts
Since August 2024, the BSP has aggressively reduced its key policy rates by a total of 200 basis points to support domestic growth, a strategy made feasible by consistently low inflation, which averaged 1.7 percent in 2025. This historical context highlights the central bank's ongoing commitment to balancing economic stimulation with price stability, a delicate task that Metrobank's analysis suggests will continue to evolve based on emerging economic data and trends.
