BSP Cuts Key Interest Rate to Spur Growth

The Bangko Sentral ng Pilipinas (BSP) reduced its key policy rate by 25 basis points to 5.75 percent during the Monetary Board’s latest meeting, signaling a shift to a less restrictive monetary stance.

The rates on the overnight deposit and lending facilities were also adjusted to 5.25 percent and 6.25 percent, respectively.

The central bank expects inflation to remain within target over the policy horizon, with a slight upward adjustment for 2025 from 3.3 percent to 3.4 percent.

The 2026 inflation forecast remains unchanged at 3.7 percent, and inflation expectations are described as well-anchored.

However, risks to the inflation outlook lean upward, driven by potential increases in transport fares and electricity rates.

On the downside, lower rice import tariffs are expected to help mitigate inflationary pressures.

The Monetary Board emphasized that domestic demand remains firm but subdued.

Private spending is projected to gain from easing inflation and improving labor market conditions, though external risks could dampen economic activity.

BSP officials stated that the decision aligns with supporting economic growth while ensuring price stability.