Policy Rate Updates: BSP begins easing cycle to support growth momentum

The Bangko Sentral ng Pilipinas (BSP) has begun its monetary easing cycle by cutting its policy rate by 25 basis points (bps), bringing the Reverse Repurchase (RRP) Rate to 6.25%. This move, which aligns with our expectations, marks the BSP’s first adjustment since October 2023 and precedes any action by the US Federal Reserve.

The decision comes as the BSP revises its inflation projections, forecasting 3.4% for 2024, 3.1% for 2025, and introducing a 3.2% baseline for 2026. BSP Governor Eli Remolona Jr. noted that inflation risks have shifted to the downside for 2024 and 2025, primarily due to the impact of reduced rice tariffs, although upside risks persist from higher electricity rates and external factors.

The rate cut is partly motivated by the need to support growth momentum, following modest consumption and soft private investment in the second quarter GDP results. Governor Remolona signaled potential further easing, projecting a total of 50 basis points in cuts for 2024 and an additional 125 bps in 2025, which could bring the target RRP rate to 4.75% by the end of 2025.

We maintain our forecast of 75 bps worth of cuts for the year, anticipating two more 25-bp reductions in the remaining Monetary Board meetings, which would bring the target RRP to 5.75% by year-end.

Download our report below for more details.

POLICY RATE UPDATES

So it begins: BSP starts monetary easing

Just as we projected, the BSP has begun easing rates to spur economic growth.

Download