- Decision
- Lower
- Rate change
- 25 bps
- target reverse repurchase rate
- 4.75%
The Monetary Board of the Bangko Sentral ng Pilipinas cut the Target Reverse Repurchase (RRP) rate by 25 bp to 4.75 percent, lowering the overnight deposit and lending facility rates to 4.25 percent and 5.25 percent, respectively, as a benign, within-target inflation outlook and a weakened growth outlook marked by softer domestic demand and infrastructure-related governance concerns justify additional accommodation amid external uncertainties. Following three identical 25 bp reductions in April, June and August, the policy rate has fallen from 5.75 percent over the past six months. The Board noted that inflation expectations remain well anchored and, while prospective electricity rate hikes and higher rice import tariffs could add limited upside pressures, overall price pressures are expected to ease. It also observed that external headwinds continue to cloud the domestic outlook. The central bank signalled further vigilance, saying it sees room to support activity while maintaining price stability and will closely monitor emerging risks.
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.