The Philippines' central bank has taken decisive action by reducing its interest rates for the second time, aligning with market expectations. The Bangko Sentral ng Pilipinas (BSP) has made the strategic decision to cut its target reserve repurchase rate by 25 basis points, bringing it down to 6%. This move comes as a result of the BSP's assessment indicating that price pressures remain manageable within the economy.
In conjunction with this decision, interest rates on the overnight deposit and lending facilities have also been adjusted correspondingly, now standing at 5.5% and 6.5%, respectively. This adjustment was detailed in the central bank's Wednesday filing on its official website. Deepali Bhargava, who serves as ING's regional head of research for the Asia-Pacific, expressed her insights on the matter, suggesting that the Philippines will likely implement further rate cuts in December.
She believes that another reduction of 25 basis points in policy rates is probable, primarily driven by a notable slowdown in inflation. The latest data indicates that the country's consumer price index (CPI) recorded its lowest level in four years for September, landing at a significant 1.9%. Additionally, the annual average CPI has dropped to 2.9%, showcasing a rate lower than the government's target for the year.
This decline hints at a more favorable economic environment conducive to further easing of monetary policy. Moreover, the BSP has raised its balance of risks for 2025 and 2026 to 3.3% and 3.7%, respectively. This adjustment is primarily due to anticipated changes arising from electricity rates and higher minimum wages in regions outside of Metro Manila.
However, the central bank has also noted downside factors related to the impacts of lower rice import duties, which could potentially affect the inflation landscape moving forward. Investors and stakeholders in the financial markets should be aware of these monetary policy shifts and their implications for the broader economic outlook in the Philippines..