Manila: The Bangko Sentral ng Pilipinas (BSP) on Thursday delivered another 25 basis points cut in interest rates. The latest cut brings the BSP's reverse repurchase rate to 5 percent and the interest rates on the overnight deposit and lending facilities to 4.5 percent and 5.5 percent, respectively. The BSP has so far reduced policy rates by a total of 150 basis points since last year.
According to Philippines News Agency, BSP Governor Eli Remolona Jr. shared insights during a briefing at the BSP office in Manila, stating, "Based on the latest data, I think this puts us at our sweet spot for both inflation and output. The projected inflation rate over the next year or so is where we wanted to be. Output is moving to where we think our capacity is." He characterized the current policy rate as a "Goldilocks rate," indicating it is neither too high nor too low. Remolona added that the bank's decision was made after careful consideration of various scenarios.
The BSP projects inflation to settle at 1.7 percent this year, with forecasts standing at 3.3 percent for 2026 and 3.4 percent for 2027. Remolona noted that inflation expectations remain well-anchored, although potential electricity rate adjustments and higher rice tariffs could raise inflationary pressures over the policy horizon.
According to the BSP, domestic demand has remained steady, but US policies' impact on global trade and investment continues to affect global economic activity, which may temper the outlook for the Philippine economy. Remolona remains optimistic that the cumulative rate cuts will aid in boosting economic growth.
BSP Assistant Governor Zeno Abenoja stated that the policy rate cuts would help achieve the lower end of the government's economic growth target. He noted that given the cumulative policy rate cuts since August, reaching the low end of the growth target, around 5.5 percent, could be feasible this year.
The BSP emphasized that emerging risks will require close monitoring, and the Monetary Board will determine the monetary policy response based on the evolving outlook for inflation and growth. Remolona indicated that there might be room for one more rate cut this year, provided economic data develops as anticipated. The BSP assured that it would continue to safeguard price stability to ensure monetary policy settings are conducive to sustainable economic growth and employment.
