Fitch Ratings predicts a shallower reduction in policy interest rates in the Philippines this year, potentially benefiting larger banks with stable deposits and diverse funding sources. Smaller lenders, however, may face limited gains. The agency expects the Bangko Sentral ng Pilipinas' target reverse repurchase rate to fall to 4.75% by end-2025. Higher-than-expected rates could further bolster Philippine banks. Meanwhile, potential US tariff hikes and inflation risks may lead to the Federal Reserve keeping interest rates elevated, potentially impacting Southeast Asian rate-cutting cycles.
AMID expectations of policy rate cuts in the Philippines this year, a shallower reduction could benefit larger banks but offer limited gains for smaller lenders, according to Fitch Ratings.
Fitch Ratings expects the Bangko Sentral ng PIlipinas’ target reverse repurchase rate to settle at 4.75 percent by end-2025, falling by 100 basis points from the current 5.75 percent. This would position these banks to enjoy modestly higher net interest margins compared to Fitch Ratings’ base case, it added.
BANKING INTEREST RATES PHILIPPINE ECONOMY FED POLICY SOUTHEAST ASIA
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