BSP makes surprise rate cut

The Bangko Sentral ng Pilipinas (BSP) made an unexpected 25-basis-point cut to its benchmark interest rate, pointing to soft domestic demand and governance issues surrounding public infrastructure spending.

- By KEISHA TA-ASAN

At its fifth policy review this year, the Monetary Board reduced the target reverse repurchase rate to 4.75 percent — the lowest level in three years, or since the 4.25 percent rate recorded in September 2022.

The Monetary Board also reduced the interest rates on the overnight deposit and lending facilities to 4.25 percent and 5.25 percent, respectively.

“On balance, the Monetary Board sees scope for a more accommodative monetary policy stance. The favorable inflation outlook and moderating domestic demand provide room to further support economic activity,” the BSP said.

The latest policy move brings the total rate cuts to 175 basis points since August 2024, as the BSP continues to calibrate its monetary settings to balance inflation control and economic recovery.

In a press briefing, BSP Governor Eli Remolona Jr. said the decision reflects the central bank’s latest reading of economic conditions and “judicious adjustments” to its models amid signs of weakening business sentiment.

“The outlook for growth has softened in the near term. Governance concerns on public infrastructure spending have weighed on business sentiment,” he said.

“The stock market has declined, and there are now fewer companies with expansion plans. Weaker growth means weaker demand and lower inflation.”