THE BANGKO SENTRAL ng Pilipinas (BSP) is likely to cut policy rates by 25 basis points (bps) each this month and in August, as inflation settles below the 2-4% target this year, Deutsche Bank said.

“Our base case is for 25-bp rate cuts in the coming June and August meetings,” Deutsche Bank Research Economist Junjie Huang said in a report.

The Monetary Board resumed its rate-cutting cycle in April, reducing the benchmark rate by 25 bps to 5.5%. The central bank has lowered borrowing costs by 100 bps since it started easing in August last year.

Deutsche Bank said the risk of inflation breaching the central bank’s 2-4% target “remains limited.”

“Full-year inflation in 2025 is at risk of coming below BSP’s 2-4% target range,” it said. “We had recently downgraded our forecast to 1.9% from 2.4%.”

The BSP expects inflation to average 2.3% this year. Headline inflation slowed to 1.4% in April, bringing the four-month average to 2%.

Inflation was 1.3% last month, according to a median estimate of 17 economists in a BusinessWorld poll last week. The government will release May inflation data on Thursday.

BSP Governor Eli M. Remolona, Jr. earlier said cooling inflation has given them “plenty of room” to cut rates this year. He said they could deliver two more rate cuts this year, in “baby steps” of 25 bps.

The Monetary Board’s next policy review is on June 19, followed by three more meetings in August, October and December.

Deutsche Bank said the easing inflation outlook would be supported by low rice prices.

“Rice prices are likely to remain low amid a global supply glut and the rollout of P20 per kilogram subsidized rice, as well as the June 2024 reduction in rice tariffs which would continue to work its way through,” it added.

In April, rice prices fell 10.9% after declining 7.7% in March.

The average price of a kilo of regular milled rice dropped 13.3% year on year to P44.45 in April, while well-milled rice fell 10.4% to P50.54 and special rice declined 6.2% to P60.69 per kilo, according to data from the local statistics agency.

“In addition, falling global oil prices could keep a lid on the Philippines’ domestic fuel prices,” Mr. Huang said.

Oil prices rebounded by more than $1 a barrel on Monday after oil producer group the Organization of the Petroleum Exporting Countries and their allies (OPEC+) decided to increase output in July by the same amount as it did in each of the prior two months, which came as a relief to those who expected a bigger increase, Reuters reported.

Brent crude futures climbed 2.33% or $1.46 to $64.24 a barrel by 6:26 a.m. GMT after settling 0.9% lower on Friday. US West Texas Intermediate crude was at $62.45 a barrel, up 2.73% or $1.66 after a 0.3% decline in the previous session. Both contracts were down more than 1% last week.

The OPEC+ on Saturday decided to raise output by 411,000 barrels per day in July, the third month the group increased it by the same amount, as it looks to wrestle back market share and punish overproducers. The group had been expected to discuss a bigger production hike.

Oil prices have been on the decline in the past few weeks as investors waited for the latest OPEC+ output hike announcement. — Luisa Maria Jacinta C. Jocson