The Bangko Sentral ng Pilipinas (BSP) lowered its key policy rate anew on Thursday, shaving 25 basis points off the Target Reverse Repurchase (RRP) rate to bring it down to 4.25 percent, as policymakers responded to softer economic growth while keeping a close watch on inflation risks.
Following its latest monetary policy meeting, the BSP’s Monetary Board also adjusted the interest rates on its overnight facilities. The deposit facility was reduced to 3.75 percent, while the lending facility was set at 4.75 percent, maintaining the central bank’s interest rate corridor around the new benchmark.
The move reflects a calibrated easing stance at a time when inflation remains manageable but growth momentum has moderated. While price pressures are broadly contained, inflation forecasts for 2026 were revised slightly upward, driven mainly by supply-side factors that authorities expect to be temporary.
Even so, inflation expectations remain firmly anchored, with projections indicating a return close to the 3 percent target by 2027.
The rate reduction comes as economic growth has fallen short of the BSP’s earlier expectations, weighed down by weaker domestic demand. Consumption and investment indicators have softened in recent months, prompting concerns about the pace of recovery. However, the central bank noted that more recent data point to a potential rebound in the second half of the year, contingent on a sustained improvement in business and consumer confidence.
By trimming rates, the BSP aims to provide additional support to economic activity without undermining its core mandate of price stability. Lower borrowing costs are expected to ease financing conditions for businesses and households, potentially stimulating spending and investment.
Still, the Monetary Board underscored that policy decisions remain data-dependent. Officials signaled continued vigilance, particularly regarding incoming inflation data and evolving supply-side developments. The BSP reiterated that overall policy settings will remain aligned with its objective of maintaining price stability in a manner conducive to sustainable growth and employment.
With the latest adjustment, the central bank appears to be striking a careful balance: cushioning the economy against slower demand while preserving credibility in its inflation-targeting framework.
