- Decision
- Lower
- Rate change
- 25 bps
- target reverse repurchase rate
- 5.25%
The Bangko Sentral ng Pilipinas (BSP) Monetary Board cut the Target Reverse Repurchase (RRP) rate by 25 bp to 5.25%, trimming the overnight deposit and lending facility rates to 4.75% and 5.75%, respectively, as a sharply lower 2025 inflation forecast and softer growth prospects warranted a more accommodative stance. The move follows April’s 25 bp reduction that brought the policy rate to 5.50% after a hold in February. Correspondingly, the peso discount-window ceiling will shift to 6.3942% for 1–90-day loans and 6.5384% for 91–180-day loans from 23 June, with foreign-currency DWF rates unchanged. The BSP cut its 2025 inflation projection to 1.6% from 2.4% while nudging the 2026 and 2027 forecasts up to 3.4% and 3.3%, noting that expectations remain well anchored; it also flagged that US trade policy uncertainty and Middle East conflict are dampening global and, by extension, Philippine growth. Although higher oil prices, electricity adjustments and rice tariffs pose upside price risks, the Board judged the balance of risks manageable and signalled continued vigilance and data-dependent easing to sustain price stability and support employment.
Rate evolution
Over the period, the Central Bank of the Philippines lowered the Target Reverse Repurchase (RRP) Rate by a net 25 basis points to 5.0%, initially easing from 5.25% to 4.25%, signalling late in 2025 that easing was nearly over, pausing in March 2026 and then reversing course with increases from April. The earlier cuts reflected a moderated then benign inflation outlook and well-anchored expectations, which gave room to support activity as United States trade-policy uncertainty weighed on global growth and, later, weaker domestic demand and business sentiment were linked to governance concerns over infrastructure spending, even as the Board flagged pressure from oil, electricity and rice tariffs.
Amid uncertainty, it held the policy rate at 4.25% in March 2026 as Middle East oil and fertilizer shocks were seen as supply-led and tightening could delay recovery, then raised it to 4.50% in April as fuel and food price pass-through, rising core inflation, projections above the 4.0% tolerance ceiling in 2026 and 2027, and higher expectations pointed to more persistent pressures. On 17 June, the Board increased the rate to 4.75% as elevated global oil and fertilizer prices continued to drive domestic fuel and food prices, core inflation signalled broader pressures and second-round effects, and projections showed headline inflation breaching the ceiling in 2026 and 2027 and settling slightly above the 3.0% target in 2028.
On 26 August, it raised the rate by another 25 basis points to 5.0%, judging that volatile oil prices, the possible impact of severe El Niño conditions on agricultural prices, potential wage adjustments and broadening core price pressures required preemptive action, even as headline inflation had eased. Average headline inflation was still seen breaching the tolerance ceiling in 2026 and 2027 before settling close to target by 2028, while the Board said measured rate increases would anchor expectations and mitigate second-round effects and remained prepared to act as warranted.