Manila: The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) resumed its easing cycle on Thursday, reducing interest rates by 25 basis points as inflation shows signs of slowing. The latest adjustment brings the BSP's target reverse repurchase (RRP) rate down to 5.50 percent, with the rates on the overnight deposit and lending facilities also adjusted to 5 percent and 6 percent, respectively.
According to Philippines News Agency, BSP Governor Eli Remolona Jr. highlighted that the central bank's recent inflation forecasts have declined since the previous meeting in February. Specifically, the risk-adjusted inflation forecast for 2025 has decreased from 3.5 percent to 2.3 percent, while the forecast for 2026 has fallen from 3.7 percent to 3.3 percent. The risk-adjusted inflation forecast for 2027 is projected at 3.2 percent. Remolona noted that inflation expectations remain within target, with risks to the inflation outlook broadly balanced from 2025 to 2027.
The Monetary Board's decision considered the impact of a 17 percent US tariff set to be imposed on the Philippines. Remolona explained that global models were utilized to account for these tariffs, which have reduced some of the prevailing uncertainties. Despite a 90-day suspension of the tariffs, and potential changes, the announcement has provided more clarity.
Remolona also mentioned possible upward pressures, such as increases in transport charges, meat prices, and utility rates. Conversely, downward risks include the effects of lower rice import tariffs and weaker global demand. Given the more manageable inflation outlook and growth risks, the BSP is shifting towards a more accommodative policy stance, with further rate cuts anticipated this year.
Although the Monetary Board has reduced policy rates by 100 basis points since last year, Remolona described the current policy as "slightly restrictive." He indicated that there is room for further cuts without sparking inflation. BSP Assistant Governor Zeno Abenoja acknowledged that previous policy increases have impacted domestic demand, but dialing down by 100 basis points has helped sustain growth momentum. Abenoja suggested that there is still potential to make monetary policy less restrictive, supporting continued economic growth.
