The Bangko Sentral ng Pilipinas (BSP) held steady its target reverse repurchase, or borrowing, rate at 5.75 percent at the monetary policy meeting Thursday and kept the interest rates on the overnight deposit and lending facilities unchanged at 5.25 percent and 6.25 percent, respectively. The decision comes as the central bank monitors the risks surrounding inflation and domestic growth amid heightened global policy uncertainty.
In its latest update, the BSP adjusted its inflation forecast for 2025 slightly upward, revising the risk-adjusted projection to 3.5 percent from 3.4 percent. The forecast for 2026 remained steady at 3.7 percent, with inflation expectations still within the target range. The BSP cited balanced risks to inflation, with potential upside pressures coming from utilities, while lower rice import tariffs continue to pose a downside risk.
Despite strong domestic growth prospects, the policy-making monetary board expressed concern over global economic developments and their potential impact on the local economy. As a result, the BSP opted to keep its policy stance unchanged for now, signaling a prudent approach to any future rate cuts.
Financial markets here and overseas mostly anticipated for the monetary authorities to recalibrate the borrowing rate of 5.75 percent by at least 25 basis points or even double that number at the rate-setting February MB meeting. This view was earlier boosted by a series of rate cuts in the immediate past MB meetings that brought the borrowing rate down from 6.25 percent in August last year.
Equities traders were big in projecting a 25 basis point cut in the policy rate to 5.5 percent given more recent signals from BSP governor Eli Remolona that such a reduction remains on the table.
But Finance chief Ralph Recto, a member of the seven-man MB, doubted that colleagues at the rate-setting body would move ahead of the US Fed whose own members have indicated that such an adjustment is forthcoming no earlier than December this year.
Recto and analysts at Moody’s Analytics, for instance, have keenly noted that the January price readings were unchanged at 2.9 percent the previous December and well above the market consensus rate of only 2.7 percent. The higher headline readings were driven by food and alcoholic beverage price adjustments.
Also, core inflation, which excludes volatile food and energy items from the consumer price index (CPI) basket regularly monitored by the Philippine Statistics Authority, persists at 2.6 percent as of latest, from 2.8 percent the previous December.
But however way events later turn, the BSP on Thursday committed to gradually shift to a less restrictive monetary policy stance while remaining data-dependent to ensure price stability and foster sustainable growth. The central bank will continue to closely monitor both inflationary trends and external factors before making further adjustments to interest rates.
