Softer-than-expected inflation in October has strengthened the case for another interest rate cut by the Bangko Sentral ng Pilipinas (BSP) before year-end, giving the central bank more room to support a slowing economy.
Consumer prices held steady at 1.7% in October, unchanged from September and within the BSP’s forecast range of 1.4% to 2.2%.
The figure remains below the central bank’s 2% to 4% target. “The outlook for inflation is generally benign, remaining well within the target range over the policy horizon,” the BSP said.
HSBC ASEAN economist Aris Dacanay said the soft reading gives the BSP more leeway to ease policy in December.
“The BSP likely gained confidence to pump monetary policy in December after today’s—slight—downside surprise in inflation,” he said, citing declines in rice, meat, and dairy prices that offset rising electricity costs.
Dacanay added that a flexible rice tariff regime next year could help stabilize prices. “If successfully implemented, rice will neither be inflationary nor deflationary as international price shifts would simply be offset by tariff adjustments,” he said.
He also noted that soft inflation and policy clarity “strengthen the case for a December rate cut, in line with HSBC’s baseline forecast of a 25-basis-point reduction to 4.50 percent by year end.”
The BSP has cut policy rates by 175 basis points since August 2024, including a 25-basis-point reduction in October that brought the benchmark rate to 4.75%.
The central bank said it will continue to monitor fresh data and reassess its policy stance in light of inflation and growth trends.
