BSP cuts rate anew to over 3-yr low 4.25%
The Bangko Sentral ng Pilipinas (BSP) delivered another quarter-point policy rate cut on Thursday, bringing the benchmark to its lowest level in more than three years as the central bank moved to support a lethargic economy that has been recovering more slowly than officials had hoped.
The Monetary Board, the highest policy-making body of the BSP, decided to cut the key rate that guides bank lending costs to 4.25 percent, the lowest since August 2022.
The decision, made at the board’s first policy meeting of 2026, brought total reductions since the easing cycle began in August 2024 to 2.25 percentage points.
All 13 economists polled by the Inquirer had correctly anticipated yesterday’s move.
But the central bank signaled caution about offering guidance on its next steps.
It dropped a line in its earlier statement that said “the monetary policy easing cycle is nearing its end,” with Governor Eli Remolona Jr. telling a news conference that further rate cuts would now be “conditional.”
This, as Remolona also acknowledged that policymakers had underestimated the economic damage caused by the high-profile graft scandal, particularly its effect on confidence.
The central bank now expects the economy to grow by an average of 4.6 percent this year, an improvement from the disappointing 4.4 percent expansion in 2025 but still below the Marcos administration’s target of 5 percent to 6 percent for 2026.
It is only by 2027 that the BSP expects growth to approach the economy’s potential, forecasting an expansion of 5.9 percent.
Remolona said confidence may return “within a few months,” citing “tentative signs” of recovery based on “soft” data measuring both consumer and business sentiment.
Still, he said the path of monetary easing had become “less certain,” adding: “To the extent we can support growth without causing inflation, we will support growth.”
The BSP expects inflation to average 3.6 percent this year and 3.2 percent next, still within the official 2 percent to 4 percent target band.
“In December, we were much more certain of where the economy was going. We had a shock and we thought we will recover from that shock very quickly,” the BSP chief said. “It didn’t happen. So now, we are less certain of where we want to go [and] where we would go.”
“So, the forward guidance is less clear now than it was,” he added.
In a commentary, Jason Tuvey, economist at Capital Economics in London, said there is room for more easing in the coming months.
“With the economy set to remain weak amid the ongoing corruption scandal and inflation low, we think there will be at least one more 25-basis point cut in the coming months,” Tuvey said.
