Philippine Central Bank Cuts Rate Unexpectedly

(RTTNews) - The Philippines' central bank unexpectedly reduced its key interest rates by 25 basis points on Thursday, for the fourth time this year and signaled further reduction to support economic growth.

The Monetary Board of the Bangko Sentral ng Pilipinas, headed by Governor Eli Remolona, decided to reduce the policy rate by 25 basis points to 4.75 percent. The bank was expected to hold the rate at 5.00 percent. The bank has lowered the rate by 25 basis points each in April, June, August and October.

Interest rates on the overnight deposit and lending facilities were adjusted to 4.25 percent and 5.25 percent, respectively.

"On balance, the Monetary Board sees scope for a more accommodative monetary policy stance," the BSP said in a statement.

"The favorable inflation outlook and moderating domestic demand provide room to further support economic activity," the bank added.

Data released this week showed that consumer price inflation accelerated to 1.7 percent in September from 1.5 percent in August. However, core inflation softened to 2.6 percent from 2.7 percent.

Policymakers observed that the outlook for inflation was benign and well within the target range. At the same time, the outlook for domestic economic growth weakened amid concerns about public infrastructure spending and uncertainty from the external environment.

ING has forecast 2026 GDP growth of 5.8 percent for the Philippines. Risks to this outlook are clearly tilted to the downside, ING economist Deepali Bhargava said.

"In addition to concerns about public infrastructure spending, lingering uncertainty over the impacts of tariffs on investment further compounds the risk," the economist said.

"Given this backdrop, we believe the likelihood of the final 25bp rate cut, currently penciled in for the first quarter of next year, being brought forward to December has increased meaningfully," Bhargava added.