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Wednesday, Sep 10, 2025
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Philippine Central Bank Signals Potential Interest Rate Cuts Amid Soothing Inflation
BSP Governor Eli M. Remolona Jr. indicates possibility of two additional rate cuts by the end of 2023 following the lowest inflation rates in five years.
Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr. announced that the central bank may implement further interest rate cuts, owing to a recent decline in inflation rates, which have reached a five-year low.
During a press briefing on May 23, Remolona indicated that there is ample scope for a potential 50-basis-point reduction in interest rates by the end of the year.
The Philippine Statistics Authority (PSA) reported that inflation eased to 1.4 percent in April, significantly below the government's target range of 2 to 4 percent, but within BSP’s forecast of 1.3 to 2.1 percent for the same month.
The April figure contributes to an average inflation rate of 2 percent for the first four months of the year.
In his remarks, Remolona projected that the monetary policy may see two additional cuts, which would likely be discussed during the upcoming policy meeting scheduled for June 13, with analysts anticipating a 25-basis-point cut at that time.
He specified that rate adjustments would typically occur in increments of 25 basis points, though they may not happen in consecutive meetings.
Remolona emphasized the importance of careful consideration regarding the timing and scale of rate cuts, noting that a reduction of 50 basis points might signal unease, despite current indicators showing that growth remains stable.
He stated, 'We’re trying to strengthen the transmission mechanism so a rate cut may be more effective than before.'
Despite the possibility of rate reductions, he cautioned, 'we don’t want to cut too much.
If we cut to the point where our demand exceeds our capacity, then that will be inflationary.' The governor refrained from identifying specific local or global factors that may influence the BSP's decisions in upcoming meetings.
He acknowledged the complexity of the current economic environment, highlighting challenges posed by global trade tensions and their impact on monetary policy, which he described as 'new territory' for central banks.
To date, the BSP has reduced key interest rates by a total of 100 basis points, taking the rate down to 5.5 percent, down from 6.5 percent, reflecting the start of the current easing cycle initiated in August 2024. Should the projected cuts materialize, the key borrowing rate would decrease to 5 percent by year-end.
The BSP's policy meetings for the rest of the year are scheduled for June, August, October, and December.
During a press briefing on May 23, Remolona indicated that there is ample scope for a potential 50-basis-point reduction in interest rates by the end of the year.
The Philippine Statistics Authority (PSA) reported that inflation eased to 1.4 percent in April, significantly below the government's target range of 2 to 4 percent, but within BSP’s forecast of 1.3 to 2.1 percent for the same month.
The April figure contributes to an average inflation rate of 2 percent for the first four months of the year.
In his remarks, Remolona projected that the monetary policy may see two additional cuts, which would likely be discussed during the upcoming policy meeting scheduled for June 13, with analysts anticipating a 25-basis-point cut at that time.
He specified that rate adjustments would typically occur in increments of 25 basis points, though they may not happen in consecutive meetings.
Remolona emphasized the importance of careful consideration regarding the timing and scale of rate cuts, noting that a reduction of 50 basis points might signal unease, despite current indicators showing that growth remains stable.
He stated, 'We’re trying to strengthen the transmission mechanism so a rate cut may be more effective than before.'
Despite the possibility of rate reductions, he cautioned, 'we don’t want to cut too much.
If we cut to the point where our demand exceeds our capacity, then that will be inflationary.' The governor refrained from identifying specific local or global factors that may influence the BSP's decisions in upcoming meetings.
He acknowledged the complexity of the current economic environment, highlighting challenges posed by global trade tensions and their impact on monetary policy, which he described as 'new territory' for central banks.
To date, the BSP has reduced key interest rates by a total of 100 basis points, taking the rate down to 5.5 percent, down from 6.5 percent, reflecting the start of the current easing cycle initiated in August 2024. Should the projected cuts materialize, the key borrowing rate would decrease to 5 percent by year-end.
The BSP's policy meetings for the rest of the year are scheduled for June, August, October, and December.
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