Bangko Sentral cuts key policy rate to 5.25% amid slower inflation outlook

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The Bangko Sentral ng Pilipinas lowered key interest rates to 5.25% as inflation forecasts fall below government target

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) on Thursday, June 19, reduced policy rates by 25 basis points or 0.25% amid a moderated inflation outlook and slowing global trade.

This brings the country’s key interest rate to 5.25% from 5.5% in April/

BSP Governor Eli Remolona Jr. cited the moderated inflation outlook, as the BSP lowered its inflation rate forecast for 2025 to 1.6% to 2.4%, below the government’s target range.

Interest rates are some of the tools central banks use to control inflation. Lower interest rates often mean lower borrowing costs, encouraging the public to spend and stimulate the economy.

BSP Deputy Governor Zeno Abenoja attributed the lower inflation forecast to slower food inflation and lower crude oil future prices.

Inflation slowed further to 1.3% in May due to a reduction in power prices and the continuous drop in rice prices.

Rice prices have been experiencing deflation or negative inflation since the start of 2025, averaging at -7.7% so far. The Philippine Statistics Authority attributed this to lower tariffs on rice imports.

“Until recently we have seen oil prices continue to come down. But even with the more recent numbers of oil prices, international oil prices, they continue to be relatively lower than what we were seeing last year,” Abenoja said.

While spot market oil prices rose to $68 to $69 per barrel due to growing tensions between Israel and Iran, Abenoja noted that future prices remain low due to the possible increase in oil production.

The BSP also noted indications of a slow down in global trade due to the hovering uncertainty over the United States’ trade policy and the conflict in the Middle East. 

More cuts, no peso intervention

Moving forward, Remolona said the Monetary Board sees the need for a more accommodative policy stance amid rising geopolitical tensions and uncertainties brought by global trade policies.

Remolona earlier hinted at cutting the interest rates twice this year, with the first in June’s policy meeting. He said that one more 0.25% rate cut may be possible later in the year depending on the data.

“If things remain on track, then we will probably cut once more. But depending on the data, we will cut twice more. Depending on the data, we may not cut at all,” he said.

Remolona added that he sees no reason for the BSP to intervene in the exchange rate at the moment as the peso slid back to the P56 level against the US dollar this week.

“When they are big enough, it usually takes a few weeks of continuous depreciation, and then we might intervene. For now, I don’t see a reason,” he said. – Rappler.com