The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) on Thursday reduced its policy rate by 25 basis points amid moderating inflation outlook.
The BSP’s target reverse repurchase (RRP) or overnight borrowing rate was cut to 5.25 percent. The adjustment also led to changes in the interest rates on the overnight deposit and lending facilities, which are now at 4.75 percent and 5.75 percent, respectively.
The Monetary Board’s move comes as the outlook for inflation moderated. The BSP’s inflation forecast for 2025 was adjusted from 2.4 percent to 1.6 percent.
Inflation forecasts for 2026 rose from 3.3 percent to 3.4 percent and for 2027 from 3.2 percent to 3.3 percent.
“Inflation expectations remained well anchored,” the BSP said.
The Philippine Statistics Authority (PSA) earlier reported that inflation rate eased to 1.3 percent in May 2025 from 1.4 percent in April. As a result, the average five-month inflation settled at 1.9 percent.
The Monetary Board also noted indications of a deceleration in global economic activity, driven by uncertainty over US trade policy and the conflict in the Middle East. This would lead to slower growth in the Philippines.
“A rise in oil prices, electricity rate adjustments, and higher rice tariffs, would add to inflationary pressures,” the BSP said.
The Monetary Board said that on balance, there is a need for a more accommodative monetary policy stance, but emerging risks to inflation from rising geopolitical tensions and external policy uncertainty require closer monitoring.
The Monetary Board said it would continue to assess the impact of prior monetary policy adjustments.
“Going forward, the BSP will safeguard price stability by ensuring monetary policy settings are conducive to sustainable economic growth and employment,” it said.
