Philippine central bank cuts policy rate by 25 basis points to 4.5%

[MANILA] The Philippine central bank cut its key policy rate by 25 basis points to a three-year low of 4.5 per cent on Thursday (Dec 11), as expected by markets.

It said that the outlook for growth had weakened, while inflation was benign.

It was the fifth successive cut in the benchmark rate by the Bangko Sentral ng Pilipinas. All but one of the 27 economists polled by Reuters had forecast a 25 basis point cut, with the other expecting a cut of 50 basis points.

Philippine central bank Governor Eli Remolona said that the latest interest rate cut may be the last after monetary authorities signalled the end of the easing cycle, with domestic demand set for a gradual recovery. 

“On balance, the Monetary Board sees the monetary policy easing cycle nearing its end,” the central bank said in a statement. “Any additional easing will likely be limited and will be guided by incoming data.” 

The easing comes at a time when inflation has averaged below the central bank’s 2 to 4 per cent target for the year, at 1.6 per cent so far in 2025.

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The outlook for domestic economic growth has weakened further, the BSP said in its statement. Overall business sentiment has continued to decline amid concerns over governance issues and lingering uncertainty over global trade policy, it said.

“Nevertheless, domestic demand is expected to rebound slowly as the full impact of monetary policy easing works its way through the economy and as the pace and quality of public spending improves,” it said.

While Remolona earlier conceded that economic growth will unlikely hit the government’s 5.5 to 6.5 per cent target for this year, he also expects recovery to start in mid-2026 and will be back on track in 2027. REUTERS