Bangko Sentral cuts benchmark rate by 25 basis points

MANILA — The Bangko Sentral ng Pilipinas has reduced its benchmark rate by 25 basis points amid slowing inflation.

The BSP said its target overnight reverse repurchase rate is now 5.25 percent, down from 5.5 percent in its previous rate-setting meeting in April.

BSP Governor Eli Remolona said the Monetary Board cut interest rates as the outlook for inflation moderated.

"The inflation forecast for 2025 fell from 2.4 percent to 1.6 percent. Meanwhile, forecasts for 2026 rose marginally from 3.3 percent to 3.4 percent and for 2027 from 3.2 percent to 3.3 percent," Remolona said.

Inflation further eased in May to 1.3 percent, bringing the average inflation for the first five months of the year to 1.9 percent, as food price increases eased, the Philippine Statistics Authority earlier said. 

Aside from the slowdown in food inflation, the BSP also noted that world oil prices continued to go down, with the price of Dubai crude being lower than the central bank's assumed average price for the year.

BSP Deputy Governor Zeno Abenoja said the central bank also eased rates due to the possible "moderation" in economic activity.

But Abenoja also said the central bank is closely monitoring the situation in the Middle East over its possible impact on world oil prices, which can in turn stoke inflation.  

"The Monetary Board is very vigilant and they have identified the episodes or possible episodes of a further rise in oil prices as something that could add inflationary pressures moving forward," Abenoja said.

Remolona said the BSP may cut interest rates again this year.

"If things remain on track, then we'll probably cut once more. Depending on the data, we may cut twice more. Depending on the data, we may not cut at all," Remolona said.