BSP cuts key rate by 25 basis points

MANILA — The Bangko Sentral ng Pilipinas (BSP) Monetary Board reduced the target Reverse Repurchase (RRP) Rate by 25 basis points to 4.25% at its monetary policy meeting on Feb. 19, 2026.

The interest rates on the overnight deposit and lending facilities were adjusted to 3.75% and 4.75%, respectively.

The rate cut is expected to translate into lower borrowing costs for consumers and businesses, potentially reducing interest rates on home loans, auto loans, personal loans, and credit card balances over the coming weeks and months.

For homebuyers, the reduction could mean lower monthly amortization payments on new mortgages, while existing borrowers with variable-rate loans may see their monthly payments decrease.

Businesses may also benefit from cheaper access to credit, which could encourage expansion, investment in equipment, and hiring — factors that could support job creation and economic recovery.

However, the downside for savers is that banks may also lower interest rates on time deposits and savings accounts, potentially reducing the returns on peso-denominated savings instruments.

The rate cut comes as the outlook for inflation remains manageable, according to BSP Governor Eli M. Remolona, Jr.

However, inflation forecasts have risen slightly for 2026 due mainly to supply-side pressures, which are likely to be temporary.

Despite the slight uptick in forecasts, inflation expectations remain firmly anchored, and inflation is expected to return close to the 3% target by 2027.

The Monetary Board’s decision was influenced by weaker-than-expected economic growth, which has undershot the BSP’s projections due to softer domestic demand.

Latest indicators point to a recovery in the second half of the year, but growth will depend largely on how quickly confidence recovers.

The BSP emphasized that the Monetary Board will continue to be vigilant and guided by incoming information, specifically data on inflation.

The central bank said it will ensure that overall policy settings remain in line with its pursuit of price stability conducive to sustainable growth and employment.

The rate reduction marks the BSP’s latest move in calibrating monetary policy amid a complex economic environment balancing inflation management with the need to support economic expansion.

The target RRP rate serves as the BSP’s primary tool for influencing borrowing costs across the economy, with reductions typically aimed at stimulating economic activity by making credit more affordable for businesses and consumers.