Policy Rate Updates: Philippine central bank takes baby steps in rate cut cycle

As widely expected, the Bangko Sentral ng Pilipinas (BSP)’s Monetary Board (MB) continued its easing cycle with a quarter-point policy rate cut on October 16. A similar move is on the horizon.

Today’s cut brings the Reverse Repurchase (RRP) rate to 6.00%, with the RRP and Federal Funds Rate differential now at 100 bps.

Metrobank Research maintains its baseline forecast of a cumulative 75 basis points of reductions for the year.

After today’s 25-bp cut, the second for this year, we expect a similar sized cut by the BSP at the December MB meeting, bringing the target RRP to 5.75%. Metrobank Research also expects further 100-bps worth of RRP rate reductions in 2025, taking the target RRP to 4.75%.

At today’s briefing, BSP Governor Eli Remolona said price pressures in 2024 remain manageable due to lower food inflation, including rice. However, risk to inflation in 2025 and 2026 has “shifted to the upside.”

The recent policy easing, along with the 250-bps reduction in the reserve requirement ratio (RRR), should provide a more accommodative policy environment to help boost private consumption and investments.

Download our report below for more details.

POLICY RATE UPDATES 

Measured is the word: BSP takes another baby step

BSP continues with its monetary easing cycle with a quarter-point rate cut

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