The Philippine central bank reduced its benchmark rates by 25 basis points for the second straight meeting on Wednesday, as inflation remained low.
The Monetary Board of the Bangko Sentral ng Pilipinas lowered the target reverse repurchase rate to 6.00 percent from 6.25 percent.
The interest rates on the overnight deposit and lending facilities were accordingly adjusted to 5.50 percent and 6.50 percent, respectively. The new rates will take effect on October 17.
The interest rates were previously lowered by quarter point in August, which was the first cut since November 2020.
In September, consumer price inflation halved to a four-year low of 1.9 percent from 3.3 percent. This was also below BSP’s forecast range of 2.0-2.8 percent for the month.
As a result, the year-to-date average of 3.4 percent was within the government’s inflation target range of 2.0 percent to 4.0 percentage point for 2024.
At the same time, core inflation fell to 2.4 percent from 2.6 percent.
Today, the bank downgraded its risk-adjusted inflation forecast for 2024 to 3.1 percent from 3.3 percent. But the outlook for 2025 and 2026 were lifted to 3.3 percent and 3.7 percent, respectively.
The bank said risks to the outlook for 2025 and 2026 was shifted toward the upside due to potential adjustments in electricity rates and higher minimum wages.
Further, the board expects domestic growth to continue to be strong based on improved prospects for household income and consumption, investment and government spending amid monetary easing.
“On balance, the within-target inflation outlook and well-anchored inflation expectations continue to support the BSP’s shift toward less restrictive monetary policy,” the bank said.
“Looking ahead, the Monetary Board will maintain a measured approach in its easing cycle to ensure price stability conducive to sustainable economic growth and employment,” the bank added.
The BSP is set to cut the policy rate by another 25 basis points at the December meeting, with further easing likely in 2025, Capital Economics’ economist Harry Chambers said.
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