The Bangko Sentral ng Pilipinas (BSP) unexpectedly cut its benchmark interest rate by 25 basis points to 4.75 percent during its rate-setting meeting today, defying widespread market expectations of a hold at 5 percent. This marks the lowest policy rate since October 2022 and signals a shift toward a more accommodative stance as the central bank aims to support faltering domestic growth.
Citing a “benign” inflation outlook, with price growth well within the 2 to 4 percent target range and inflation expectations firmly anchored, the BSP said it now sees room to ease policy. Risks from potential electricity rate hikes and increased tariffs on rice imports remain, but overall inflation pressures are seen as manageable.
The decision comes amid growing concerns over a slowdown in economic activity, with the Monetary Board highlighting weakening business sentiment tied to governance issues and stalled public infrastructure projects. External uncertainties have also led to signs of softening demand.
Alongside the main policy rate cut, the BSP also lowered its overnight deposit and lending rates to 4.25 percent and 5.25 percent, respectively. The move is expected to ease financing conditions for households and businesses, as the central bank seeks to strike a balance between maintaining price stability and supporting economic recovery.
