The Market Monitor Minding the Nation's Business
By Diego C. Cagahastian
The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas (BSP), decided to prune the nation’s interest rates by 25 basis points at its meeting last December 11.
It was the MB’s last meeting for the year, and marked the fifth consecutive time that the rate was decreased.
This time around, the Board lowered the Target Reverse Repurchase (RRP) Rate to 4.50% from 4.75%, following a similar reduction in October. The rate of 4.5 percent is the lowest level in more than three years.
With the latest move, the rates on the overnight deposit and lending facilities were also reduced to 4% and 5%, respectively.
Banks are upbeat as they see a strong demand for loans as the economy welcomes the New Year 2026, with the borrowing costs going south and inflation tamed to manageable levels.
Sources in the banking sector predict that loans are likely to expand by 11 to 13 percent next year, with the robust retail sector leading the drive.
The Monetary Board, headed by BSP Governor Eli Remolona as chairman, said the inflation outlook remains favorable, even in the wake of the seasonal Christmas demand for basic goods and some extras to make the holiday season celebrations lively.
Economists and financial analysts earlier released their forecasts for the year-end 2026 and for 2027, citing a slight increase in inflation rate to 3.2 percent to 3.0 percent, respectively.
“Domestic demand is expected to rebound slowly as the full impact of monetary policy easing works its way through the economy and as the pace and quality of public spending improves,” the BSP’s statement read.
The Monetary Board also said that the easing cycle of the monetary policy “nears its end.”
“Any additional easing will likely be limited and will be guided by incoming data,” the BSP’s statement read.
“Looking ahead, the BSP will ensure that overall policy settings remain consistent with maintaining price stability conducive to sustainable economic growth,” it added.
The last time the Monetary Board trimmed its benchmark interest rate by 25 basis points (bps) was on October 9, 2025.
On October 9, the BSP Monetary Board cut its benchmark interest rate by another 25 basis points, marking the fifth consecutive rate reduction since April.
Conversely, the board noted a weakening outlook for domestic economic growth, citing the continued decline in overall business sentiment due to concerns over governance and ongoing global trade uncertainties.