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.
“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,” said BSP Governor Eli Remolona Jr. in a briefing at the BSP office in Manila.
“The policy rate itself is at our Goldilocks rate, neither too high, not too low. I would characterize this as still dovish but slightly less so than before in terms of the forward guidance. We came to this decision after weighing many different scenarios,” he added.
Remolona said the BSP sees the inflation outlook to be “very manageable.”
The BSP projects inflation to settle a 1.7 percent this year.
The forecasts stand at 3.3 percent for 2026 and at 3.4 percent for 2027. Remolona said inflation expectations also remain well-anchored.
Possible electricity rate adjustments and higher rice tariffs could however raise inflationary pressures over the policy horizon.
According to the BSP, domestic demand has held firm but the impact of US policies on global trade and investment continue to weigh on global economic activity.
This, it said, could temper the outlook for the Philippine economy.
Remolona, however, is optimistic that the cumulative rate cuts will help boost economic growth.
“Are the rate cuts significant enough? I think so. As you know, we don’t just move the rate and reverse ourselves. Usually it goes in the same direction and the cumulative effect of that is significant enough to strengthen output growth for example,” he said.
BSP Assistant Governor Zeno Abenoja, meanwhile, said the policy rate cuts would help attain the lower end of the government’s economic growth target.
“Given the cumulative policy rate cuts that we’ve had since August, we think that the target numbers could be feasible this year. The low end is about 5.5 percent , we think we could be there. The further impact of those policy actions could also be felt moving forward,” he said.
Emerging risks will continue to require close monitoring, the BSP said.
The Monetary Board will determine the monetary policy response based on the evolving outlook for inflation and growth.
“I think we have space for one more cut. If the data develops the way we think it will develop, I think maybe one more cut this year. I think that’s likely, that’s a likely evolution of policy rate. Of course if something bad happens to output that suggest there’s a lack of demand, then we cut some more,” Remolona said.
The BSP assured that it would safeguard price stability by ensuring monetary policy settings are conducive to sustainable economic growth and employment. (PNA)
