BSP eases rates for third straight meeting

The Monetary Board of the Bangko Sentral ng Pilipinas on Thursday decided to lower key policy rates for the third consecutive meeting, citing well-anchored inflation expectations.

In a statement released Thursday afternoon, BSP Governor Eli Remolona Jr. said the Monetary Board decided to cut key policy rates by 25 basis points, bringing the target reverse repurchase rate to 5.00%, the overnight deposit rate to 4.50%, and the overnight lending facility rate to 5.50%.

Policy rates were also reduced by 25 basis points each at the Monetary Board's meetings in April and June after keeping them unchanged in February. 

The central bank now expects inflation to average 1.7% this year, slightly higher than the 1.6% projected during the June meeting.

“Inflation expectations also remain well-anchored. Meanwhile, possible electricity rate adjustments and higher rice tariffs could raise inflationary pressures over the policy horizon,” Remolona said.

“The Monetary Board observed that domestic demand has held firm. However, the impact of US policies on global trade and investment continues to weigh on global economic activity. This could temper the outlook for the Philippine economy,” he added.

The inflation forecast for 2026 was adjusted downward to 3.3% from 3.4% previously, and for 2027 to 3.4% from 3.2%.

“Emerging risks will continue to require close monitoring. The Monetary Board will determine the monetary policy response based on the evolving outlook for inflation and growth,” Remolona said.

Among the risks cited by Remolona were the higher electricity rates and food prices, but he said inflation is still seen to remain within target even if these materialize.

Further cuts

According to Remolona, Thursday’s cut could be the end of the easing cycle, but there is still space for one more rate cut this year. The last two meetings are set for October 9 and December 11, respectively.

With the latest easing, the benchmark rate is now at what Remolona described as the Goldilocks level—not too high and not too low—as the central bank has now lowered rates by a cumulative 150 basis points since the start of the cycle in 2024.

“There’s still a possibility for another rate cut, but just a possibility. We’re not saying it’s likely,” he told reporters in Manila City.

“I think we have space for one more cut. If the data develops the way we think it will develop, maybe one more cut this year,” he added.

Remolona in July hinted at the possibility of two more rate cuts this year, as he said then that inflation and economic growth levels gave the central bank room for further easing.

In a separate commentary, Gareth Leather, a senior Asia economist at Capital Economics, indicated that the Philippine economy could benefit from additional support.

“Low inflation and falling interest rates will provide some support to demand this year. But with fiscal policy being tightened and exports set to weaken, we expect growth to struggle. However, the main reason we are expecting further easing is that price pressures are very weak,” he said. —VBL, GMA Integrated News