The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) on Thursday reduced interest rates by another 25 basis points (bps).
The latest cut brings the interest rates on the overnight deposit and lending facilities to 4.75 percent and 5.75 percent, respectively.
The BSP has so far reduced policy rates by a total of 125 bps since last year.
"The Monetary Board took this action as the outlook for inflation moderated," BSP Governor Eli Remolona Jr. said in a briefing at the central bank’s head office in Manila.
The BSP's inflation forecast for 2025 was adjusted downward to 1.6 percent from the previous 2.4 percent.
Forecasts for 2026, however, slightly rose to 3.4 percent from 3.3 percent and for 2027, from 3.2 percent to 3.3 percent.
Inflation expectations also remained well anchored.
"We now recognize the slowdown in food inflation, something that we have been observing for the past 5 months of the year. We think that it will continue to spill over on the inflation dynamics moving forward," BSP Deputy Governor Zeno Ronald Abenoja said.
Abenoja said global oil prices declined in the past months and while an increase was observed recently, international oil prices continue to be relatively lower than last year.
"Finally, we recognize that there could be a moderation in economic activity in the near term. The activity in the domestic economy continue(s) to be firm but there could be some moderation and that is also considered in the near term outlook for 2025," he said.
The Monetary Board also underscored indications of a deceleration in global economic activity, driven primarily by uncertainty over US trade policy and the conflict in the Middle East.
Remolona said this would lead to slower growth in the Philippines.
He said a rise in oil prices, electricity rate adjustments and higher rice tariffs, would add to inflationary pressures.
"On balance, the Monetary Board sees the need for a more accommodative monetary policy stance. Emerging risks to inflation from rising geopolitical tensions and external policy uncertainty require closer monitoring," Remolona said.
He said another 25 basis points policy rate cut is possible within the year.
"The Monetary Board will also continue to assess the impact of prior monetary policy adjustments. Going forward, the BSP will safeguard price stability by ensuring monetary policy settings are conducive to sustainable economic growth and employment," he added.
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