BSP retains policy rates amid global uncertainty

The Bangko Sentral ng Pilipinas (BSP) decided to keep policy rates unchanged on Thursday, maintaining its cautious stance amid global economic uncertainties. This follows three consecutive rate cuts last year.

Speaking at a briefing in Manila, BSP Governor Eli Remolona Jr. announced that the Monetary Board opted to retain the central bank’s target reverse repurchase rate at 5.75 percent. The overnight deposit and lending facility rates will also remain at 5.25 percent and 6.25 percent, respectively.

“Inflation expectations remain within the target range,” Remolona said.

The BSP adjusted its risk-adjusted inflation forecast for 2025 to 3.5 percent from 3.4 percent in its previous assessment in December, while the 2026 projection remains unchanged at 3.7 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. The impact of lower import tariffs on rice remains the main downside risk to inflation,” Remolona noted.

He emphasized that while domestic economic growth remains resilient, heightened uncertainty over global economic policies and their impact on the local economy played a significant role in the decision to hold rates steady.

Despite earlier expectations from economists for a 25-basis-point rate cut, Remolona explained that the BSP is taking a more measured approach given the unpredictability of global trade and economic policies.

“I think we need a little bit of time to, I guess, recalibrate our models. We are facing an unusual phenomenon in terms of the uncertainty of policies that will be put in place, and our models don’t capture those things really well. So we have to redo our models and try to capture… the uncertainty itself has an effect, and that is not in our models,” he said.

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

Remolona underscored that given these uncertainties, it is prudent to maintain the current policy stance until clearer economic signals emerge.

“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,” he said.

“Looking ahead, the BSP anticipates continuing its measured shift to less restrictive monetary policy settings, even as previous policy adjustments further work their way through the economy,” he added.

He reassured that the BSP remains committed to a data-driven approach in maintaining price stability, ensuring that monetary policy supports sustainable economic growth and employment.