BSP cuts key rate by another 25 bps

The Bangko Sentral ng Pilipinas (BSP) trimmed interest rates anew yesterday, as the Monetary Board moved to support economic activity amid softer domestic demand while keeping inflation expectations anchored.

- By KEISHA TA-ASAN

At its first policy meeting of the year, the Monetary Board reduced the BSP's target reverse repurchase rate by 25 basis points (bps) to 4.25 percent. The interest rates on the overnight deposit and lending facilities were likewise adjusted to 3.75 percent and 4.75 percent, respectively.

The latest move brings cumulative rate cuts since August 2024 to 225 bps, extending the central bank's easing cycle after aggressive tightening in previous years aimed at curbing inflation.

In a statement, the BSP said the decision reflects a balance between supporting growth and maintaining price stability, with the inflation environment still seen as manageable.

"Economic growth has undershot the BSP's expectations due to weaker domestic demand. Latest indicators point to a recovery in the second half of the year, but growth will depend largely on how quickly confidence recovers," it said.

The country's gross domestic product (GDP) grew by just three percent in the fourth quarter of 2025, the weakest pace since 2011 excluding the pandemic period, bringing full-year expansion to 4.4 percent. The growth last year was below the government's 5.5 to 6.5 percent target.

During a press conference, BSP Governor Eli Remolona Jr. said growth was softer than expected as investment activity slowed amid weak confidence.