The Bangko Sentral ng Pilipinas (BSP) cut its key policy rate by 25 basis points on Thursday, signaling a shift toward supporting economic growth as inflation remains under control.
The central bank lowered its Target Reverse Repurchase (RRP) Rate to 4.25 percent. Rates on its overnight deposit and lending facilities were also reduced to 3.75 percent and 4.75 percent, respectively.
A rate cut generally makes borrowing cheaper. For businesses, this could lower the cost of loans used for expansion, inventory, or equipment purchases. For households, it may gradually reduce interest rates on mortgages, auto loans, and other credit, helping ease monthly payments and encouraging spending.
By trimming rates, the BSP aims to boost domestic demand, which has recently been weaker than expected.
The BSP said inflation remains manageable, although projections for 2026 have edged up slightly due to temporary supply-side pressures, such as higher production or transport costs. Despite this, inflation expectations remain steady, and price growth is still projected to settle near the government’s 3 percent target by 2027.
Stable inflation expectations are important because they help businesses plan investments and allow households to make spending decisions without worrying about sharp price spikes.
Economic growth has fallen short of the central bank’s earlier forecasts, mainly due to softer domestic demand. However, recent data suggest activity could pick up in the second half of the year. The pace of recovery will depend largely on how quickly business and consumer confidence improves.
The Monetary Board said it will remain vigilant and continue to monitor incoming data, particularly inflation trends. The BSP emphasized that it will keep policy settings aligned with its goal of maintaining price stability while supporting sustainable economic growth and employment.
The rate cut reflects a balancing act: keeping inflation in check while providing timely support to businesses and households as the economy regains momentum.
