On Wednesday, the central bank of the Philippines lowered its benchmark interest rates by 25 basis points for the second consecutive meeting, as inflation continues to remain subdued.
The Monetary Board of the Bangko Sentral ng Pilipinas modified the target reverse repurchase rate from 6.25 percent to 6.00 percent.
The overnight deposit and lending facility interest rates were adjusted to 5.50 percent and 6.50 percent, respectively. These new rates will be effective starting October 17.
This follows a quarter-point reduction in rates in August, marking the first decrease since November 2020.
In September, consumer price inflation fell to a four-year low of 1.9 percent, down from 3.3 percent, also lagging behind the BSP’s forecast range of 2.0-2.8 percent for the month.
The year-to-date average inflation rate of 3.4 percent aligns with the government’s inflation target range of 2.0 percent to 4.0 percent for 2024.
At the same time, core inflation decreased from 2.6 percent to 2.4 percent.
Today, the bank revised its risk-adjusted inflation forecast for 2024 to 3.1 percent, down from 3.3 percent, while raising the outlook for 2025 and 2026 to 3.3 percent and 3.7 percent, respectively.
The bank indicated that risks for the outlook in 2025 and 2026 have shifted upward due to potential increases in electricity rates and raised minimum wages.
Moreover, the board anticipates that domestic growth will remain robust, backed by better prospects for household income, consumption, investment, and government expenditure, amid a backdrop of monetary easing.
“Overall, the favorable inflation outlook within target limits and well-grounded inflation expectations support the BSP’s transition toward a less restrictive monetary policy,” stated the bank.
“Looking forward, the Monetary Board intends to adopt a careful approach in its easing cycle to maintain price stability that fosters sustainable economic growth and employment,” the bank added.
According to Capital Economics’ economist Harry Chambers, the BSP is expected to reduce the policy rate by another 25 basis points in December, with additional easing likely in 2025.
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