The Bangko Sentral ng Pilipinas (BSP) reduced its benchmark interest rate by 25 basis points to 5.5 percent at its rate-setting meeting Thursday, citing easing inflation and the need to support domestic consumption and credit growth amid global headwinds.
The widely anticipated move comes as inflation cooled to 1.8 percent in March—the slowest since May 2020 and below the BSP’s 2 percent to 4 percent target range—giving policymakers more room to stimulate the economy.
“The decision reflects our commitment to maintaining price stability while also ensuring adequate support for economic activity,” BSP governor Eli M. Remolona Jr. said.
The BSP also lowered the rates on its overnight deposit and lending facilities to 5 percent and 6 percent, respectively.
Economists see the rate cut as a timely step to encourage household spending and borrowing, both of which have shown signs of softening. The economy grew by a revised 5.7 percent in 2024, falling short of government targets due to typhoon-related disruptions that dampened consumer activity.
The central bank noted that rising global trade tensions are adding uncertainty to the growth outlook, reinforcing the need for monetary easing to cushion domestic demand.
“We’re looking at slower growth but while other central banks are looking at a hard landing, we’re looking at slowing inflation – which gives us more freedom” in terms of the policy rate, Remolona said.
Financial markets largely welcomed the move, with analysts expecting lower borrowing costs to provide a modest lift to credit activity in the coming quarters.
