The Bangko Sentral ng Pilipinas (BSP) said Thursday its policy-making Monetary Board reduced the overnight borrowing rate by 25 basis points to 5.0 percent on broadly unchanged inflation outlook.
It also cut the overnight deposit and lending facilities to 4.5 percent and 5.5 percent, respectively.
The BSP kept its 2025 inflation forecast at 1.7 percent. The forecasts stand at 3.3 percent for 2026 and at 3.4 percent for 2027, it said.
“Inflation expectations also remain well-anchored. Meanwhile, possible electricity rate adjustments and higher rice tariffs could raise inflationary pressures over the policy horizon,” the BSP said in a statement.
BSP Governor Eli Remolona Jr. said domestic demand has held firm, but the impact of US policies on global trade and investment continue to weigh on global economic activity. “This could temper the outlook for the Philippine economy,” he said.
Remolona said the Philippine economy remains at a “sweet spot” for both inflation and output. “The policy rate itself is at our goldilocks rate, neither too high nor too low. I would characterize this as still dovish, but slightly less so than before in terms of the former guidance,” said Remolona.
“The Monetary Board will determine the monetary policy response based on the evolving outlook for inflation and growth. Going forward, the BSP will safeguard price stability by ensuring monetary policy settings are conducive to sustainable economic growth and employment,” the BSP said.
“Emerging risks will continue to require close monitoring. The Monetary Board will determine the monetary policy response based on the evolving outlook for inflation and growth,” the BSP said.
The BSP said it would safeguard price stability by ensuring monetary policy settings are conducive to sustainable economic growth and employment.
The BSP has adjusted the key interest rate by 75 bps this year amid the softening inflation rate.
Data showed that inflation eased to 0.9 percent in July, a near six-year low, while the gross domestic product (GDP) grew 5.5 percent in the second quarter.
Jean de Castro, head of fixed income at Manulife Investment Management, said these signals indicate easing price pressures and resilient economic activity, providing the BSP with room to further ease its accommodative stance.
De Castro said the BSP’s rate cut and continued dovish posture would likely keep government bond yields low, encouraging investors to favor longer-duration fixed-income instruments.
“As inflation remains subdued and monetary policy remains supportive, investors may increase their exposure to government securities and extend portfolio duration, expecting stable or declining yields,” she said.
