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The Bangko Sentral ng Pilipinas’ (BSP) much-anticipated quarter-point interest rate cut is expected to bolster local economic expansion, especially as global headwinds, including US tariffs, could weigh on Philippine growth.
Governor Eli M. Remolona Jr. stated at an April 10 press conference that the Monetary Board (MB)—the BSP’s highest policy-making body—“noted the more challenging external environment, which would dampen global GDP [gross domestic product] growth and pose a downside risk to domestic economic activity.”
As expected, the MB lowered the key policy rate by 25 basis points (bps) to 5.50 percent on Thursday, April 10, as the central bank resumed monetary policy easing after the unexpected pause in February due to global economic uncertainties at that time.
One of those risks materialized when US President Donald Trump announced sweeping tariffs on April 2, including a 17-percent reciprocal tariff on Philippine imports. This, along with other external challenges such as a potential global economic slowdown, would necessitate “further cuts” for 2025.
“We contemplate further cuts this year. I can’t tell you exactly how many more cuts, but definitely further cuts this year,” Remolona said, adding that the central bank is still taking baby steps—meaning 25 bps at a time, but not at every policy meeting.
Regarding the impact of trade policies on growth, Remolona said the Philippines would experience a slowdown similar to the rest of the world.
“Like the rest of the world, we’re looking at slower growth. But unlike the rest of the world, we’re also looking at lower inflation. The rest of the world is looking at higher inflation,” the governor explained.
While the rest of the world worries about rising inflation, the BSP anticipates a lower inflation environment for the Philippines, given that the country has “relatively less trade than many of the big countries in the world.”
“We have one of the lower announced tariffs. So, it could be disruptive to us, but not as disruptive to some of the major trade economies,” he noted.
The latest interest rate reduction signals a shift in the BSP’s priority toward supporting economic growth, as updated inflation forecasts for 2025 to 2027 remain comfortably within the target range.
Meanwhile, Remolona pointed out that “upside pressures come from possible increases in transport charges, meat prices, and utility rates. Meanwhile, downside risks are linked to the continuing effects of lower tariffs on rice imports and the expected impact of weaker global demand.”
The BSP has revised its inflation forecasts downward, with 2025 now projected at 2.3 percent from 3.5 percent, and 2026 at 3.3 percent from 3.7 percent. The 2027 projection remains at 3.2 percent.
March’s 1.8-percent inflation marked the slowest pace in nearly five years, last seen in May 2020 during the height of pandemic lockdowns.
For the first quarter of the year, the average inflation rate stood at 2.2 percent, falling comfortably within the government’s two- to four-percent target band of manageable price increases conducive to economic growth.
