Philippine Central Bank Cuts Rate in Surprise Move

The Central Bank of the Philippines cut its benchmark interest rate by 25 bps to 4.5% during its final meeting of the year, marking the fifth straight reduction and bringing total cuts this year to 125 bps. The move aligns with market expectations and lowers borrowing costs to their lowest since October 2022, as a benign inflation outlook allows policymakers room to support growth. Inflation forecasts for 2026 and 2027 were slightly raised to 3.2% and 3.0%, remaining within the BSP’s 2%-4% target. The Monetary Board noted that domestic growth has weakened amid softer business sentiment, governance concerns, and lingering global trade uncertainty, though demand is expected to recover gradually as the effects of monetary easing and improved public spending take hold. The BSP also indicated that the easing cycle is nearing its end, with any additional cuts likely limited and guided by incoming data. Overnight deposit and lending rates were also adjusted to 4.00% and 5.00%, respectively.

The Central Bank of the Philippines cut its benchmark interest rate by 25 bps to 4.75% during its October 2025 meeting, defying market expectations of a hold at 5%. This move brought the rate to its lowest level since October 2022, as the central bank cited a benign inflation outlook, with price growth well within the official target range and inflation expectations remaining firmly anchored. However, potential electricity rate adjustments and tariff hikes on rice imports could add upward pressure on prices. Meanwhile, the Monetary Board highlighted a weakening domestic growth outlook, partly due to dampened business sentiment stemming from concerns over governance and the implementation of public infrastructure projects. Additionally, signs of softening demand reflect persistent uncertainties in the external environment. The central bank’s overnight deposit and lending facility rates were also lowered to 4.25% and 5.25%, respectively.

The Central Bank of the Philippines reduced its benchmark interest rate by 25 bps to 5% during its August 2025 meeting, aligning with market expectations and marking the lowest level since November 2022. The annual inflation rate eased to 0.9% in July 2025 from 1.4% in the previous month, registering the lowest reading since October 2019. The central bank’s inflation forecast remains broadly stable, with projections of 1.7% for 2025, 3.3% for 2026, and 3.4% for 2027. However, potential adjustments in electricity rates and higher rice tariffs pose upside risks to the inflation outlook over the policy horizon. Meanwhile, the Board noted that domestic demand remains resilient, although external headwinds—particularly the effects of US policy shifts on global trade and investment—continue to weigh on global economic activity, moderating the outlook for the Philippine economy. The central bank’s overnight deposit and lending facility rates were also lowered to 4.5% and 5.5%, respectively.