BSP surprises market as it holds off rate cut

The Bangko Sentral ng Pilipinas (BSP) opted to keep borrowing costs unchanged yesterday amid lingering global uncertainties, marking the first time it held interest rates steady after three straight rate cuts last year.

- KEISHA TA-ASAN

In a briefing following the Monetary Board's first policy review this year, the BSP kept its target reverse repurchase rate at 5.75 percent. Interest rates on the overnight deposit and lending facilities remain unchanged at 5.25 and 6.25 percent.

Market watchers widely expected the BSP to cut policy rates by 25 basis points.

BSP Governor Eli Remolona Jr. said in a press conference that the central bank would typically continue cutting rates but stressed that heightened uncertainty in global trade policies made the BSP more cautious in its approach.

"Before deciding on the timing and magnitude of further reductions in the policy interest rate, the Monetary Board deems it prudent to await further assessments of the impact of global policy uncertainty and the potential effects of the actual policies," Remolona said.

According to the BSP chief, the latest inflation forecasts are not materially different from the previous forecasts in December 2024. Inflation expectations also remain within the two to four percent target range.

The BSP slightly increased the risk-adjusted inflation forecast to 3.5 percent from 3.4 percent for 2025. But it kept its forecast for 2026 at 3.7 percent.