BENGALURU, Feb 17 (Reuters) - The Philippine central bank will cut its key interest rate by 25 basis points to 4.25% on Thursday and keep it there through 2026, a Reuters poll of economists found, as subdued inflation gives policymakers room for what could be a final move to support domestic growth.
Consumer inflation rose to 2.0% in January, the fastest pace in 11 months, but remained at the lower end of the Bangko Sentral ng Pilipinas' (BSP) 2%-4% target range. With price pressures still contained, attention has shifted to economic growth, which slowed to a near five-year low of 3.0% last quarter.
That slowdown was partly driven by a corruption scandal linked to government infrastructure projects that dented consumer and investor confidence. Most economists said the softer growth backdrop gives the central bank scope to cut rates once more.
Last week, BSP Governor Eli Remolona said the door remains open for further interest rate cuts to support growth.
More than 90% of economists - 25 of 27 - in a February 10-16 poll forecast the central bank would trim its overnight borrowing rate by 25 bps to 4.25% on February 19. Two expected rates to remain at 4.50%.
"The recent upside surprise in CPI is likely to be less significant. The sharp slowdown in growth in the past quarter and slide in public capital spending will be of more immediate concern for the BSP," wrote Kausani Basak, an analyst at ANZ.
"However, weak consumer and domestic confidence will likely restrict the impact of the rate cut. A solution to the governance-related issues followed by a pickup in infrastructure spending will be pivotal for growth momentum to improve in the Philippines this year."
The BSP has eased rates by a cumulative 200 basis points between August 2024 and December 2025, the most dovish among its regional peers, but growth has yet to recover significantly.
Among those with end-year forecasts, a slight majority - 11 of 21 economists surveyed - expected rates to be at 4.25%. Eight saw them at 4.00%, while one each predicted 4.50% and 3.75%.
Median forecasts showed the central bank would hold rates at 4.25% for the rest of this year, a view unchanged from the December poll.
"With real interest rates still restrictive and growth momentum uneven, a modest cut would help support domestic activity without undermining the inflation outlook," said Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines.
"We expect the BSP to accompany the move with cautious, data-dependent guidance, emphasising that future actions will remain contingent on inflation dynamics and external conditions."
(Other stories from the February Reuters global economic poll)
(Reporting by Veronica Dudeimaia Khongwir; Polling by Susobhan Sarkar and Pranoy Krishna; Editing by Vivek Mishra; Editing by Joe Bavier)
By Veronica Dudei Maia Khongwir
