BDO's Tan expects BSP rate cut in August

BDO's Tan expects BSP rate cut in August

Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. has indicated that a policy rate cut in August is "quite likely," according to comments made at the 2025 Economic Journalists Association of the Philippines Economic Forum [1]. This expectation aligns with the views of BDO chief economist, Jose Taningco, who also anticipates a rate cut in the near future.

Remolona stated that while three rate cuts are now considered unlikely, two cuts remain "more likely" based on incoming data. He emphasized that the BSP is monitoring core inflation, which is expected to reach three percent around 2027. The BSP has already implemented 125 basis points of rate cuts since August 2024 and has lowered banks’ reserve requirements to boost liquidity and support growth. Despite these measures, inflation is projected to slow to 2 percent in 2025, below averages for emerging markets and advanced economies [1].

BDO's Taningco expects rice inflation to remain low despite temporary import suspensions and tariff hikes, citing lower global rice prices compared to last year. He projects that the domestic-driven economy and ASEAN tariff harmonization will sustain growth, projecting GDP growth of 6 percent next year [1]. Security Bank chief economist Angelo Taningco expects rice inflation to remain low despite temporary import suspensions and tariff hikes, citing lower global rice prices compared to last year.

Meanwhile, EastWest Bank CEO Jerry Ngo noted that the BSP’s policy clarity has helped boost loan growth to 12 percent. He described the current economic conditions as a "Goldilocks moment" — low inflation, easing rates, and improving demand [1]. HSBC Philippines CEO Sandeep Uppal echoed the sentiment, stating that the private sector is looking for stability, reforms to improve ease of doing business, and lower interest rates to encourage investment [1].

In contrast, Federal Reserve Governor Michelle Bowman has advocated for three interest rate cuts in 2025 to address a slowing U.S. economy and weakening labor market. Bowman dissented against the Fed’s July 31 decision to hold rates at 4.25%-4.5% and believes proactive rate cuts could prevent further labor market deterioration and reduce the need for larger policy corrections [2]. Market expectations show a nearly 90% chance of a rate cut to 4%-4.25% in September, with the Fed Chair Jerome Powell’s upcoming Jackson Hole Symposium speech on August 22 anticipated to provide further clarity [2].

The Federal Reserve faces a challenging balancing act in the months ahead, with labor market indicators flashing warning signs and economic data growing less reliable. The Fed’s next steps will likely come into sharper focus at the Jackson Hole Symposium, where investors and policymakers alike will be watching closely for signals on the Fed’s path forward [2].

In Colombia, the Central Bank raised its year-end inflation forecast by 30 basis points to 4.7% for 2025 and 2026, while the 2025 GDP growth forecast was revised up to 2.7%. The neutral rate estimate for 2025 remained unchanged at 2.7%, while the 2026 projection was revised up by 10 basis points to 3.1%. The report highlighted the challenges posed by fiscal imbalances, a tight labor market, and rising inflationary pressures, suggesting limited room for interest rate cuts in the short term [3].

References:
[1] https://bilyonaryo.com/2025/08/11/remolona-keeps-door-open-for-two-more-rate-cuts-amid-inflation-risks/money/
[2] https://wallstreetpit.com/128366-feds-bowman-pushes-for-3-interest-rate-cuts-in-2025/
[3] https://www.itau.com.br/itaubba-pt/analises-economicas/latam/colombia-monetary-policy-report-inflation-economic-activity-and-neutral-rate-revised-upward