BSP cuts down interest rates to 6.25%
MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) on Thursday announced that it reduced key policy rates by 25 basis points (bps), going from 6.50% down to 6.25%.
The BSP had retained its rates at 6.5% since October 2023. BSP Gov. Eli Remolona said that another 25 bps cut is also possible by October or December.
“The monetary board decided to reduce the BSP’s Target Reverse Repurchase Rate by 25 basis points to 6.25%. The interest rates on the overnight deposit and lending facilities were accordingly adjusted to 5.75% and 6.75%, respectively,” Remolona said in a press briefing.
The BSP governor said that the cut made on Thursday will mainly be felt by 2025, as there were lag effects.
“It will make, we hope, lending rates lower, make credit easier,” Remolona said.
According to the BSP, headline inflation is also projected to have a downward trend. It is expected to fall within the government’s target of 2% to 4%, despite the recent uptick in July.
Philippine inflation surged to 4.4% in July, overshooting the government’s target of 2% to 4%. Food prices drove the increase, accounting for 55.5% of the inflation. Housing, water, electricity, gas and other fuels also contributed to inflation.
Asked if he thought that cutting rates was premature following this inflation surge, Remolona said they have already taken it into account.
“It wasn’t a surprise. In the same manner, we expect inflation rate to be well within the target range for the August number and September number so we still think we are justified in reducing the policy rate,” Remolona added.
The risk-adjusted inflation forecast for 2026 is 3.3%, said the BSP.
The Philippine peso recently came back stronger at 57.90 to $1 after a weakened performance from the United States dollar, according to data from the Bankers Association of the Philippines.
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