BSP Cuts Key Rate to 5.25 Percent

The Bangko Sentral ng Pilipinas has lowered its key interest rate by 25 basis points to 5.25 percent, citing easing inflation and a weakening global economic outlook, the central bank announced Thursday.

The interest rates on the overnight deposit and lending facilities were also cut to 4.75 percent and 5.75 percent, respectively.

The Monetary Board’s decision reflects a shift toward a more accommodative monetary policy as inflation forecasts continue to moderate.

The BSP downgraded its 2025 inflation forecast from 2.4 percent to 1.6 percent, while projections for 2026 and 2027 rose slightly to 3.4 percent and 3.3 percent, respectively.

“Inflation expectations remain well anchored,” the board said in a statement, adding that the need to support economic activity has grown in light of global headwinds.

Signs of slowing global growth, driven by ongoing conflicts in the Middle East and trade policy uncertainty in the United States, are expected to dampen Philippine economic momentum, the board said.

Domestically, potential price pressures may emerge from higher oil prices, electricity rate hikes, and increased tariffs on rice imports.

Despite these risks, the Monetary Board emphasized that current conditions warranted a policy rate cut to stimulate domestic demand and cushion the economy.

“On balance, the Monetary Board sees the need for a more accommodative monetary policy stance,” the board said.

The BSP also pledged to closely monitor inflationary developments and external risks while ensuring that monetary settings remain supportive of long-term price stability and employment.

Thursday’s rate cut is the first adjustment since the BSP paused hikes amid slowing inflation in 2024, following an aggressive tightening cycle to curb elevated prices that peaked after the pandemic.