BSP delivers rate cut for a third straight time

Metro Manila, Philippines - The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) delivered another 25-basis point rate cut as it expects inflation to “stay within the target range over the policy horizon.”

BSP Governor Eli Remolona Jr. announced the third consecutive cut in the key policy rate to 5.75% as the central bank wraps up its final rate-setting meeting for the year on Thursday, Dec. 19.

The latest move brings to 75 basis points the cumulative rate cuts the BSP delivered for 2024.

Remolona said that by “cutting in baby steps” – the phrase he used to describe the gradual 75-basis-point reduction this year – the BSP has a “kind of an insurance” against possible faster price spikes.

“In our discussion today, there was a sense that maybe 100 basis points over 2025 will be too much but zero would also be a little,” he told a news briefing.

He said the monetary board will continue its easing policy tack if “the data are not too surprising” and that the “surprises are small enough.”

BSP Assistant Governor Zeno Abenoja said the monetary board revised upward the baseline inflation forecast for 2025 to 3.3% and 3.5% in 2026.

“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,” Remolona said. “The impact of lower import tariffs on rice remains the main downside risk to inflation.”

“The within-target inflation outlook and well-anchored inflation expectations continue to support the BSP’s shift toward less restrictive monetary policy,” the bank’s governor also said.

Remolona said the central bank will monitor emerging upside risks to inflation, “notably geopolitical factors.”

Abenoja cited US Fed adjustments next year and policies of the incoming Trump administration as factors that could influence domestic rates.

“The Monetary Board noted that domestic demand is likely to remain firm but subdued,” Remolona said.

According to Abenoja, this meant that the BSP expects economic growth numbers “could come close” to the economic team’s target, but “probably closer to the lower end.”

For the fiscal year 2025 and up to 2028, President Ferdinand Marcos, Jr’s economic managers widened the growth target range to 6-8%.