Citing the need to stimulate growth following weaker-than-expected output in 2025, the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) on Thursday cut its 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.
Since August 2024, the BSP has lowered rates by a cumulative 225 basis points as inflation remains manageable.
BSP Governor Eli Remolona said inflation is projected to increase this year and move closer to the 3 percent target next year “due largely to supply-side factors.”
“While these factors are largely temporary, they will require continued vigilance with regard to possible lower effects,” he said, noting that “inflation expectations remain well anchored.”
“Our decision today may actually help to restore confidence, boosting investment and consumption. The pace of economic recovery will depend on how quickly confidence returns. As always, policy decisions will be driven by the data we have at the time we make those decisions,” he added.
BSP Deputy Governor Zeno Abenoja said inflation is expected to average 3.6 percent this year, up from the 3.2 percent forecast in December. The 2027 projection 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.
Because these are mostly supply-side pressures, “the impact may not be persistent,” he said.
“It could fade away after some period of time. Maybe, just one of course, there could be some what is called the base effects also playing, particularly for the first half of 2020,” he added.
PNA PHOTO