The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) said Thursday it cut its key interest rate by 25 basis points to stimulate economic growth, while keeping inflation within the target range.
The Monetary Board said it decided to reduce the BSP’s target reverse repurchase (RRP) or overnight borrowing rate to 5.75 percent from 6.0 percent.
It followed the US Federal Reserves’ interest rate reduction by 25 basis points to a range of 4.25 percent to 4.5 percent.
The peso, which tracks the differential between the Fed and BSP rates, closed at a record low of 59 against the US dollar Thursday.
The BSP said the interest rates on the overnight deposit and lending facilities were also adjusted to 5.25 percent and 6.25 percent, respectively.
“Inflation is projected to stay within the target range over the policy horizon. The risk-adjusted inflation forecast for 2025 has risen slightly to 3.4 percent from 3.3 percent in the previous meeting,” the BSP said.
It said the risk-adjusted forecast for 2026 is unchanged at 3.7 percent. “Inflation expectations remain well-anchored,” the BSP said.
“The balance of risks to the inflation outlook continues to lean to the upside due largely to potential upward adjustments in transport fares and electricity rates. The impact of lower import tariffs on rice remains the main downside risk to inflation,” it said.
The Monetary Board also said that domestic demand is likely to remain firm but subdued.
“Private domestic spending is expected to be supported by easing inflation and improving labor market conditions. However, downside risks in the external environment could materialize and temper economic activity and market sentiment,” the BSP said.
It said that on balance, the within-target inflation outlook and well-anchored inflation expectations continue to support the BSP’s shift toward less restrictive monetary policy.
“Nonetheless, the monetary authority will continue to closely monitor the emerging upside risks to inflation, notably geopolitical factors,” it said.
“Looking ahead, the Monetary Board will maintain a measured approach to monetary policy easing to ensure price stability conducive to sustainable economic growth and employment,” it said.
