BSP Cuts Key Rate to 5.5% to Support Growth

The Bangko Sentral ng Pilipinas (BSP) reduced its benchmark interest rate by 25 basis points to 5.5 percent as inflation eases and global economic risks persist.

The Monetary Board announced the policy move after its meeting Thursday, also cutting the overnight deposit and lending facility rates to 5.0 percent and 6.0 percent, respectively.

“The more manageable inflation outlook and the risks to growth allow for a shift toward a more accommodative monetary policy stance,” the BSP said in a statement.

Latest data show risk-adjusted inflation forecasts have dropped across the board, with 2025 projections declining from 3.5 percent to 2.3 percent.

Forecasts for 2026 were also revised down to 3.3 percent from 3.7 percent, while 2027 inflation is expected to average 3.2 percent.

BSP said inflation expectations remain firmly within its 2 to 4 percent target band.

The central bank noted that inflation risks are now broadly balanced, with upside risks coming from higher transport charges, utility rates, and meat prices.

However, these pressures are offset by the impact of lower rice tariffs and weaker global demand.

“The external environment is becoming more challenging, which could dampen global GDP growth and pose a downside risk to domestic activity,” BSP added.

The policy adjustment signals a shift after several quarters of tightening to combat inflation, which peaked above 8 percent in 2022.

The BSP maintained a tight monetary policy for much of 2023 as headline inflation breached target limits.

With inflation slowing and growth at risk from a weaker global outlook, analysts say the BSP’s decision offers timely support to the economy.

“This is a prudent step, given the improved inflation trajectory and lingering external headwinds,” said economist Mia Santos of Capital Insights.

She added, “The BSP is clearly signaling it is now willing to support growth while keeping inflation anchored.”

The central bank reiterated it will remain data-driven in assessing the need for future rate cuts.

“The BSP will continue to take a measured approach in deciding on further monetary easing,” it said.

Officials emphasized the need to preserve price stability as a foundation for long-term, inclusive economic growth and job creation.