BSP cuts key rates to spur domestic growth

The Bangko Sentral ng Pilipinas Monetary Board reduced key policy rates by 25 basis points last week, citing the need to stimulate growth after weaker-than-expected output in 2025.

The move sets the target reverse repurchase (RRP) rate at 4.25%, the overnight deposit rate at 3.75%, and the overnight lending rate at 4.75%. Since August 2024, the BSP has lowered rates by a total of 225 basis points amid manageable inflation.

BSP Governor Eli Remolona said inflation is projected to rise this year and approach the 3% target next year “due largely to supply-side factors.” He added, “While these factors are largely temporary, they will require continued vigilance with regard to possible lower effects.”

“Our decision today may actually help to restore confidence, boosting investment and consumption. The pace of economic recovery will depend on how quickly confidence returns. As always, policy decisions will be driven by the data we have at the time we make those decisions,” Remolona said.

BSP Deputy Governor Zeno Abenoja noted that inflation is expected to average 3.6% this year, up from the 3.2% forecast in December, while the 2027 projection was raised to 3.2% from 3%. 

He cited supply-side pressures such as the rice tariff mechanism and rising oil costs but said the impact “may not be persistent” and could fade over time.