BSP keeps rates steady amid possible trade headwinds

Metro Manila, Philippines - The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) kept interest rates steady at 5.75 percent on the back of possible trade headwinds.

BSP Gov. Eli Remolona Jr. said in a news conference Thursday, Feb. 13, that trade policy uncertainty was “higher than ever since 1960,” and can lead to situations such as “postponement of investment…hoarding of consumption goods.”

“Before deciding on the timing and magnitude of further reductions in the policy interest rate, the Monetary Board deems it prudent to await further assessments of the impact of global policy uncertainty and the potential effects of the actual policies,” Remolona said.

Ahead of Thursday’s policy meeting, the Monetary Board cut rates three consecutive times since August last year amid declining inflation. 

Remolona said the BSP “will consider keeping the rates steady,” and it would have a “measured” 25 basis point reduction if the Monetary Board decides to have another rate cut.

The next meeting will be on April 3, with four more scheduled for the year.

“Normally, we would have cut further, but something has changed. The thing that has changed is the uncertainty over what’s going on globally, especially the uncertainty over trade policy,” Remolona said.

“But there are other sources of uncertainty. And we’re not quite comfortable with evaluating the impact of that, the uncertainty itself. And then we don't quite know what the policies will be,” he added.

The unchanged policy rate came as the global economy anticipates the possible impact of US President Donald Trump’s tariff policies.

Socioeconomic Planning Secretary Arsenio Balisacan earlier said this would indirectly impact the local economy, but said that the government is “aggressive” in diversifying trade. 

READ: US aid review, tariff policy to indirectly impact PH - NEDA

“The Monetary Board noted that domestic growth prospects continue to be firm,” Remolona said.

“On balance, uncertainty about the outlook for inflation and growth warrant keeping monetary policy settings steady,” he also said.

The BSP said it is factoring in the uncertainty on the inflation outlook.

“It's a new phenomenon, so it's hard to tell. But we're discussing it with our friends in other central banks, and they're doing their own analysis, we're doing our own analysis, and we'll compare notes, and then we hope we will have an answer,” Remolona said.

Inflation forecast

The BSP’s risk-adjusted inflation forecast for the year rose to 3.5 percent from 3.4 percent in the previous meeting, while the 2026 figure remained at 3.7 percent. It also said inflation expectations were within target.

The government has a target of 2 to 4 percent.

“The risks to the inflation outlook have become broadly balanced for 2025 and 2026. Nonetheless, upside pressures are seen to come from the utilities sector,” Remolona said.

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

Remolona said the maximum suggested retail price on imported premium rice reinforced the central bank’s policy direction.

The BSP also said the release of National Food Authority rice to local government units would “also contribute to the moderation of food prices, particularly rice prices.”