Recto: Easing inflation may pave way for more BSP rate cuts

Easing inflation could give the Bangko Sentral ng Pilipinas (BSP) additional flexibility to cut interest rates further this year, according to Finance Secretary Ralph Recto.

Speaking during an informal press chat, Recto said the continued decline in inflation has opened up room for two potential rate cuts before the end of 2025.

"I think the BSP is clear that we expect a 50-basis-point rate cut all the way ‘til the end of the year. I think they've messaged that too, right? We've messaged that as well early on," he said.

So far, the BSP’s Monetary Board has lowered policy rates by 125 basis points since last year. With inflation remaining below the government’s target range, Recto said additional easing remains possible.

Headline inflation eased to 1.4 percent in June, bringing the year-to-date figure to 1.8 percent—below the lower end of the government’s 2 to 4 percent target range.

“As of today's data, I think inflation is on its way down,” Recto noted.

He added that while global monetary trends—particularly in the United States—may still influence local policy, the Philippines' domestic inflation data supports further action.

"We have room to cut. Maybe not two [more cuts], depends on what happens in the US as well. But as of today, I would assume that we're okay for two rate cuts,” he said.

Despite signs of elevated U.S. inflation and the Federal Reserve's cautious stance, Recto pointed out that political dynamics could impact U.S. monetary policy. "Trump wants to change the Fed, right? He wants a rate cut," he remarked.

The BSP’s next policy decision will be closely watched for indications of whether the anticipated rate adjustments will proceed as projected.