BSP Reduces Policy Rates By 25 bps

The Monetary Board decided to reduce the BSP’s Target Reverse Repurchase (RRP) Rate by 25 basis points to 6.0 percent.

The Monetary Board’s decision is based on its assessment that price pressures remain manageable. I Photo: Bangko Sentral ng Pilipinas Facebook

The interest rates on the overnight deposit and lending facilities were accordingly adjusted to 5.50 percent and 6.50 percent, respectively. These changes took effect on October 17, 2024.

The Monetary Board’s decision is based on its assessment that price pressures remain manageable.

The risk-adjusted inflation forecast for 2024 has eased to 3.1 percent from 3.3 percent in the previous meeting. However, the risk-adjusted forecasts for 2025 and 2026 have slightly increased to 3.3 percent and 3.7 percent, respectively.

Nevertheless, this outlook is safeguarded by well-anchored inflation expectations.

The balance of risks to the outlook for 2025 and 2026 has shifted toward the upside, mainly due to potential adjustments in electricity rates and higher minimum wages in areas outside Metro Manila.

Meanwhile, downside factors remain linked to the impact of lower import tariffs on rice.

The Monetary Board expects domestic economic growth to continue to be strong.

This reflects improved prospects for household income and consumption, investments, and government spending, which are supported by the start of the monetary easing cycle in August and the announced reduction in reserve requirements in October.

On balance, the within-target inflation outlook and well-anchored inflation expectations continue to support the BSP’s shift toward a less restrictive monetary policy. Nonetheless, the monetary authority will continue to closely monitor the emerging upside risks to inflation, including geopolitical factors.

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.