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BSP Update: Defying expectations with steady rates
BSP surprises by keeping the key policy rate unchanged, a decision it says is “prudent.”
By Metrobank Research
The Philippine central bank defies financial-market players’ expectations.
The Bangko Sentral ng Pilipinas (BSP)’s Monetary Board kept the reverse repurchase (RRP) rate unchanged at 5.75%, describing the decision as “prudent” amid global policy uncertainty.
The move goes against a market consensus of a quarter-point reduction after data showed the domestic economy grew below the government’s target for the second-straight year in 2024 and inflation remained target-consistent.
Key points
- The BSP surprised the market and maintained its RRP rate as it weighs current global policy uncertainties, particularly trade policies and their impact on the local space.
- BSP nudged its risk-adjusted inflation forecast in 2025 to 3.5% from 3.4% previously and maintained its forecast for 2026 at 3.7%.
- BSP Governor Eli Remolona confirmed that the BSP is still in its easing cycle and is making a “measured shift,” signaling some 25-basis point (bp) cuts in any of the remaining meetings.
What now?
- Metrobank Research maintains its baseline forecast that the BSP will deliver 50 bps worth of cuts this year, with RRP rate at 5.25% by year-end.
- However, Metrobank Research nudged its GDP growth projections downward to 5.8% from 5.9% previously to account for the impact of global policy uncertainties and higher inflation outlook.
(Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses.)
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