The Philippine central bank has opted to lower its benchmark interest rate by 25 basis points, citing expectations that inflation will stay within the desired range, and suggested that more policy easing could occur in the coming year.
The Monetary Board of the Bangko Sentral ng Pilipinas has reduced the key reverse repurchase rate from 6.00 percent to 5.75 percent, marking the third successive rate cut. Correspondingly, the interest rates for overnight deposit and lending facilities have been adjusted to 5.25 percent and 6.25 percent, respectively.
The BSP anticipates that inflation will remain within its targeted range throughout the policy time frame. The inflation forecast for next year has been slightly increased to 3.4 percent from 3.3 percent, with the 2026 outlook maintained at 3.7 percent. The board noted that while domestic demand is expected to stay strong, it will be somewhat restrained. Falling inflation and enhanced labor market conditions are projected to bolster domestic spending.
"The outlook for inflation to stay within target and firmly anchored inflation expectations justify the BSP's transition towards a less restrictive monetary policy," the bank stated.
"Looking forward, the Monetary Board will continue to adopt a cautious approach to easing monetary policy to preserve price stability, which supports sustainable economic growth and employment," the bank added.
Harry Chambers, an economist at Capital Economics, mentioned that the significant reduction in inflation over the past year has afforded the central bank the flexibility to proceed with policy easing, with expectations for further rate cuts in the ensuing months.
Chambers also noted that the strength of the economy allows the BSP to undertake rate cuts at a gradual pace. He predicted an additional reduction of 100 basis points in 2025.
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