BSP cuts key interest rate by 25 bps to 5.5% as inflation outlook eases

The Bangko Sentral ng Pilipinas (BSP) on Thursday reduced its benchmark interest rate by 25 basis points to 5.5 percent, citing an improved inflation outlook and moderating growth prospects.

Insider snapshot:

• BSP cuts key policy rate to 5.5%
• Deposit and lending rates set at 5% and 6%
• Inflation forecasts revised downward for 2025–2027
• BSP sees risks to inflation outlook as broadly balanced
• Global headwinds cited as downside risk to local growth

In a press briefing, BSP Governor Eli Remolona Jr. said the Monetary Board adjusted the overnight deposit and lending rates to 5 percent and 6 percent, respectively. The decision reflects the central bank’s shift toward a more accommodative stance, following months of stable price movements.

He explained that inflation forecasts presented during the meeting showed a downward revision from the February estimates.

The risk-adjusted forecast for 2025 dropped from 3.5 percent to 2.3 percent, while the 2026 projection eased from 3.7 percent to 3.3 percent. Inflation for 2027 is also expected to settle at 3.2 percent, well within the BSP’s target range, he said.

Remolona noted that risks to the inflation outlook are broadly balanced. Potential price pressures include possible hikes in transport fares, meat costs, and utility rates. On the other hand, downside risks stem from the continued impact of lower rice import tariffs and weaker global demand.

The BSP also acknowledged that global economic headwinds are likely to dampen growth, posing challenges to domestic economic activity.

“On balance, the more manageable inflation outlook and risks to growth allow for a shift toward a more accommodative monetary policy stance,” Remolona said.

The central bank signaled a measured approach going forward, emphasizing its commitment to data-dependent policymaking aimed at maintaining price stability and supporting economic growth.