The Bangko Sentral ng Pilipinas has trimmed its reverse repurchase rate by another 25 basis points to 4.5%, extending a policy-easing cycle that has already delivered 200 basis points of cuts since last year a note from Capital Economics says. The move was widely anticipated: all but one of the 27 economists surveyed by LSEG had expected the decision.

While the Monetary Board insisted the cycle was “nearing its end”, the central bank’s caution did little to dispel expectations of further support. The economy has slipped into a soft patch, with third-quarter GDP expanding by just 0.4% on a quarterly basis - the weakest reading outside the pandemic period since 2018. Capital Economics adds that the abrupt slowdown was driven by a 13.3% fall in government construction, after officials froze a range of public works to probe corruption allegations. More recent indicators suggest the loss of momentum has carried into the final quarter.

With the scandal likely to drag on activity well into next year, analysts expect monetary policy to do more of the heavy lifting. As a result, two additional quarter-point cuts gave been forecast bringing the policy rate to 4% by end-2026.

Inflation, meanwhile, remains subdued. Headline price growth eased to 1.5% in November, below the central bank’s 2–4% target band, while core inflation slipped for a third month to 2.4%. The BSP noted that inflation risks remain “benign” and expectations “firmly anchored”, reinforcing the case for continued accommodation as domestic demand recovers only gradually.