BSP cuts policy rates by 25 basis points as growth outlook weakens

The Bangko Sentral ng Pilipinas (BSP) reduced policy rates by another 25 basis points on Thursday, citing a benign inflation outlook but weaker economic growth prospects.

The latest adjustment brings the BSP’s Target Reverse Repurchase (RRP) rate to 4.75 percent, with the overnight deposit and lending facility rates now at 4.25 percent and 5.25 percent, respectively. The central bank has cut policy rates by a total of 175 basis points since last year.

BSP Governor Eli Remolona Jr. said inflation remains well within target, though the economy’s growth outlook has softened due to weakened business sentiment stemming from governance concerns in public infrastructure spending.

“We now find the inflation outlook to be quite benign. Inflation expectations remain well-anchored, but adjustments to electricity rates and possible increases in rice import tariffs pose some risks—though these risks look limited,” he said.

The BSP projects inflation at 1.7 percent for 2025, 3.1 percent for 2026 (down from 3.3 percent), and 2.8 percent for 2027 (from 3.4 percent).

Remolona noted that weaker business sentiment has affected investment plans, with fewer companies pursuing expansion. “We now think the output gap is wider than we thought,” he added.

BSP Deputy Governor Zeno Abenoja said growth projections are now “slightly below” the government’s targets of 5.5 percent in 2025 and 6 percent in 2026, depending largely on how infrastructure spending and business sentiment evolve.

Given the conditions, the Monetary Board signaled room for a more accommodative monetary stance.

“The favorable inflation outlook and moderating domestic demand provide room for monetary policy to further support economic growth and employment,” Remolona said.