The Bangko Sentral ng Pilipinas (BSP) surprised markets by keeping its interest rates unchanged after three consecutive rate cuts, citing heightened uncertainty surrounding US trade policies. The Monetary Board of the BSP decided to maintain the target reverse repurchase rate at 5.75%, while the interest rates on the overnight deposit and lending facilities remained at 5.25% and 6.25%, respectively.
Inflation forecasts for 2025 were slightly adjusted upward to 3.5% from 3.4%, with the projection for 2026 staying at 3.7%. The BSP emphasized that the current level of uncertainty regarding inflation and growth warranted a pause in policy changes. Policymakers are awaiting more clarity on US trade policies before making decisions on future rate cuts.
The BSP signaled its intent to continue shifting towards less restrictive monetary policy settings, though it described today’s decision as a pause, not a halt, in the easing cycle. With strong economic growth in the fourth quarter of 2024, there is limited need for aggressive rate cuts, according to Capital Economics’ Gareth Leather, who expects a total of 100 basis points of cuts in 2025.
