CONTINUED monetary easing could boost the country's growth momentum and bring results closer to the government's targets, Metrobank Research said.
"We expect recovered private consumption and investment spending, supported by the projected continued monetary easing by the BSP," it said in a commentary.
The central bank's policymaking Monetary Board last month kicked off an easing cycle by ordering a 25 basis point (bps) cut that lowered the benchmark rate to 6.25 percent.
BSP Governor Eli Remolona Jr. has said that two more rate cuts are possible this year amid an improving inflation outlook.
These could help lift economic growth, Metrobank Research said, consistent with Finance Secretary Ralph Recto's statement that growth targets can be met if rate cuts are delivered.
The Finance chief last week said the country stands a better chance of achieving this year's 6.0- to 6.5-percent growth goal if interest rates are lowered further.
He expects the economy to grow by 6.1 percent, which will also be helped by slower inflation.
Metrobank Research, however, sees growth falling short of targets, hitting 5.7 percent and rising to 6.2 percent from next year through 2026.
The outlook for 2025 and the following year are below the government's targets of 6.5-7.5 percent and 6.5-8.0 percent, respectively.
Metrobank Research said that "rate cuts alongside BSP's recently announced RR (reserve requirement) reduction would enhance the BSP's support for the economy and move the central bank into an easy and accommodative policy."
It forecast 50 bps worth of cuts for 2026, which should follow 75-bp cuts in 2024 and 100-bp in 2025.
This should bring the BSP's target reverse repurchase rate down to 4.25 percent by the end of 2026.
As this could lead to a wider interest rate differential of 125 bps with the US Federal Reserve's rates, Metrobank Research projected a stronger peso-dollar rate of P53.7:$1 by the end of 2026.
It said the currency will likely finish this year at P55.3:$1 and appreciate to P54.5:$1 next year.
The Development Budget Coordination Committee expects the rate to range between P56-P58:$1 this year. The 2025-2028 forecast is P55-P58:$1.
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