MANILA — Global investment bank Nomura is forecasting two additional 25-basis-point interest rate cuts by the Bangko Sentral ng Pilipinas (BSP) in 2026, bringing the policy rate down to 3.75% by year-end.
In a January 12, 2026, research note, Nomura’s chief Asia economist Rob Subbaraman and his team cited the following reasons for their call:
Nomura’s Rate Cut Scenario for 2026
- February 2026: 25 bps cut (to 4.25%)
- May/June 2026: Another 25 bps cut (to 3.75%)
- End-2026 Policy Rate: 3.75% (total 75 bps easing from current 4.5%)
This is more aggressive than the current market consensus (which prices in one final cut at most) and aligns with Nomura’s view that Philippine inflation will remain subdued (averaging ~2.0–2.5% for 2026) while growth continues to lag the official target (projected 5.0–5.8%).
Key Supporting Factors in Nomura’s View
- Inflation Outlook — December 2025 headline inflation at 1.8% (still well below BSP’s 2–4% target band); core inflation stable at ~2.4%.
- Growth Weakness — 2025 GDP growth likely ~4.6–5.0% (four-year low excluding pandemic); 2026 projected at 5.4% — below the government’s 6%+ comfort zone.
- Global Context — Fed likely to cut rates further in 2026, giving BSP room to ease without major peso pressure.
- Governance Drag — Ongoing corruption fallout and governance concerns keep investor sentiment cautious, limiting growth upside.
Nomura notes that BSP Governor Eli Remolona Jr. has repeatedly said the easing cycle is “nearing its end” and that the current 4.5% rate is “very close to where we want it to be.” However, the bank believes data-dependent flexibility will allow two more cuts if growth disappoints and inflation stays anchored.
Market vs. Nomura Expectations
| Scenario | Expected Cuts in 2026 | End-2026 Policy Rate | Probability (Market-Implied) |
|---|---|---|---|
| Market Consensus | 0–1 cut | 4.25–4.50% | ~70% for 0–1 cut |
| Nomura Forecast | 2 cuts | 3.75% | Higher conviction on easing |
If Nomura is correct, the additional cuts would provide further relief to borrowers (especially in real estate, consumer loans, and SMEs) while supporting economic recovery.
Here are charts showing the BSP policy rate history, inflation trend, and Nomura’s projected path for 2026.
The BSP’s next policy meeting is scheduled for February 2026 — all eyes will be on the latest inflation and GDP data.
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