Bangko Sentral resumes easing cycle by cutting policy rates to 5.5%

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The Bangko Sentral ng Pilipinas says lower risk-adjusted inflation forecasts gave the monetary authority room to cut interest rates

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) resumed its easing cycle with a 25 basis point cut on the country’s key policy rates in its policy meeting on Thursday, April 10, bringing the benchmark interest rate to 5.5%.

BSP Governor Eli Remolona Jr. cited a decline in latest inflation forecasts. The BSP adjusted its risk-adjustment inflation forecast for 2025 to 2.3% from 3.5%.

The monetary authority also reduced its 2026 inflation projections to 3.3%, as well as set its risk-adjusted inflation forecast for 2027 at 3.2%.

All figures are within the government’s target inflation rate of 2% to 4%.

Key interest rates are one of the tools that central banks use to control inflation. Lower policy rates also mean lower interest rates from banks, which encourage the public to take out loans and boost consumer spending.

The BSP acknowledged that a “more challenging external environment” could slow down the country’s domestic activity and dampen global gross domestic product (GDP) growth. However, Remolona noted that the Philippines’ slower inflation gave the monetary authority some room to cut.

Inflation further slowed to 1.8% in March, bringing the 2025 average print at just 2.2%

Remolona also explained that US President Donald Trump’s announcement of a 17% reciprocal tariff on Philippine goods cleared up some uncertainty regarding the impact of global trade.

“Of course, there’s a 90-day suspension of these tariffs and the tariffs themselves could change. So there’s still some uncertainty, but there’s less of it than before,” he said.

Despite the duties, Remolona added that the Philippines’ inflation outlook is slower compared to other countries because the country has relatively lesser trade than others. While this will disrupt Philippine trade, it will not be as disruptive as its impact on bigger trading countries.

Apart from Trump’s tariffs, BSP Sector-in-Charge of the Monetary and Economics Sector Zeno Ronald Abenoja also named other factors such as lower oil prices that could impact the Philippines’ economic growth.

“For example, if you look at the average Dubai future prices this year, it’s down by about $4 per barrel. And for 2026 and 2027, also lower Dubai oil prices, perhaps even lower than the $70 per barrel that we were seeing earlier this year. That should also provide some support to domestic economic activity,” Abenoja said.

More room for cuts?

Despite the latest rate cut, Remolona and Abenoja said the current monetary policy remains slightly restrictive, which means the BSP still has room for further rate cuts without spiking inflation.

“There’s still room to go further, to dial down, make the monetary policy less restrictive moving forward, and that should help economic growth,” Abenoja said.

The BSP has since cut 100 basis points or 1% since it began easing interest rates in August 2024. Remolona earlier said that BSP plans to cut interest rates by half a percent in 2025.

The next Monetary Board meeting is scheduled for June 19. – Rappler.com