Philippines Cuts Policy Rate To 5.75%

(RTTNews) - The Philippine central bank decided to reduce its benchmark rate by 25 basis points on Thursday as inflation is projected to remain within the target range and, hinted at further policy easing next year.

The Monetary Board of the Bangko Sentral ng Pilipinas lowered the target reverse repurchase rate to 5.75 percent from 6.00 percent. This was the third consecutive reduction.

The interest rates on the overnight deposit and lending facilities were accordingly lowered to 5.25 percent and 6.25 percent, respectively.

The BSP projected inflation to stay within the target range over the policy horizon. Inflation outlook for next year was raised marginally to 3.4 percent from 3.3 percent, while the outlook for 2026 was retained at 3.7 percent. The BSP board observed that domestic demand is likely to remain firm but subdued. Easing inflation and improving labor market conditions are forecast to support domestic spending.

"On balance, the within-target inflation outlook and well-anchored inflation expectations continue to support the BSP's shift toward less restrictive monetary policy," the bank said.

"Looking ahead, the Monetary Board will maintain a measured approach to monetary policy easing to ensure price stability conducive to sustainable economic growth and employment," the bank added.

Capital Economics economist Harry Chambers said a sharp fall in inflation over the last year has provided the central bank room to continue policy easing and it is expected to cut rates further over the coming months.

Chambers said a strong economy gives the BSP a platform to keep rate cuts gradual. The economist expects a further 100 basis points of cuts in 2025.