Philippines cuts policy rate by 25 bps as inflation outlook eases

The Bangko Sentral ng Pilipinas (BSP) has quietly loosened its monetary reins, slicing 25 basis points off its benchmark rate to land at 5.25%, in what appears to be a cautious nod to a cooler inflation wind.

Like turning down a flame no longer needed, the central bank trimmed its deposit and lending facility rates to 4.75% and 5.75%, respectively—subtle shifts, but with strategic intent.

The real twist? A dramatic rethink of inflation’s future. BSP’s 2025 forecast plunged from 2.4% to just 1.6%, painting a surprisingly soft picture. Yet, 2026 and 2027 were nudged slightly upward. The bank seems to say: the storm has passed, but clouds still hover.

BSP’s decision wasn’t born in a vacuum. Far from it. Trade tremors from Washington, and the tense hum of Middle Eastern geopolitics, echo into Asia’s financial corridors. The Philippine central bank, tuned into this global static, appears to be turning the dial toward flexibility.

And while whispers of oil shocks and electricity hikes persist, BSP says the anchors are holding—the inflation ship isn’t drifting yet.

With growth in mind and caution in pocket, the bank has opened the door—just a crack—for monetary easing. Whether that turns into a flood or a trickle will depend on the rhythm of the world outside.