BSP cuts key interest rates by another 25 basis points

MANILA, Philippines — The Bangko Sentral ng Pilipinas' (BSP) Monetary Board has reduced its key interest rates by 25 basis points on Wednesday, October 16, bringing the target reverse repurchase (RRP) rate to 6%, down from 6.25% in September.

Meanwhile, the interest rates on the overnight deposit and lending facilities were adjusted to 5.50% and 6.50%, respectively.

In a statement, the BSP attributed the rate cut to manageable inflationary conditions, with the inflation forecast for 2024 easing to 3.1%, down from 3.3%. However, the balance of risks for 2025 and 2026 has shifted toward the upside, driven mainly by potential increases in electricity rates and higher minimum wages in regions outside Metro Manila.

Lower rice import tariffs were cited as a mitigating factor against price pressures.

Despite the risks, the BSP expects robust domestic economic performance, supported by improved household incomes, increased consumption, stronger investments and enhanced government spending.

The recent easing in monetary policy, which began in August, and the reduction in reserve requirements earlier this month, further support these trends.

The BSP noted that its shift toward a less restrictive monetary stance is in line with its inflation outlook and steady inflation expectations. However, it remains vigilant against emerging risks, including geopolitical factors that could threaten price stability.

The first rate cut of 25 basis points this year occurred in August, lowering the key interest rate to 6.25% after holding steady at 6.50% since October 2023 to address inflationary pressures.