Manila: Citing the need to spur growth after weaker-than-expected output in 2025, the Bangko Sentral ng Pilipinas' (BSP) Monetary Board on Thursday cut key policy rates by another 25 basis points. The move brought the target reverse repurchase (RRP) rate to 4.25 percent, the overnight deposit rate to 3.75 percent, and the overnight lending rate to 4.75 percent.

According to Philippines News Agency, since August 2024, the BSP has reduced rates by a total of 225 basis points as inflation remains manageable. BSP Governor Eli Remolona said inflation is projected to rise this year and move closer to the 3 percent target next year 'due largely to supply-side factors.' He noted that while these factors are temporary, they require continued vigilance with regard to possible lower effects, adding that inflation expectations remain well anchored.

Governor Remolona emphasized that the decision to cut rates might help restore confidence, boosting investment and consumption. He mentioned that the pace of economic recovery will depend on how quickly confidence returns, and that policy decisions will always be data-driven.

BSP Deputy Governor Zeno Abenoja indicated that inflation is expected to average 3.6 percent this year, up from the 3.2 percent forecast in December. The projection for 2027 was also raised to 3.2 percent from 3 percent. He attributed the higher forecasts to the rice tariff mechanism's impact on domestic prices and rising oil costs, among other factors. Abenoja explained that because these are mostly supply-side pressures, their impact may not be persistent and could fade after some time. He also mentioned the potential influence of base effects, particularly in the first half of 2020.