Central Bank decreases rates in October

Bank cuts rates unexpectedly: At its meeting on 9 October, the Bangko Sentral ng Pilipinas (BSP) decided to reduce the target reverse repurchase (RRP) rate for the fourth consecutive time by 25 basis points to 4.75%, defying market expectations of a hold. This brought cumulative rate cuts to 175 basis points since July 2024.

BSP pumps a bit more oxygen into an economy losing steam: With inflation below the Central Bank’s 2.0–4.0% target, well-anchored expectations and limited risks to the inflation outlook, policymakers saw room to cut rates as economic growth clouds darkened. Business sentiment has cooled amid concerns over governance and the implementation of public infrastructure projects—due to corruption allegations—while softening demand points to an economy running below potential. Moreover, stronger external headwinds due to U.S. tariffs reinforced the case for easing.

Bank to stand pat: The BSP remained open to further rate cuts as the favorable inflation outlook and cooling domestic demand provide room to further support economic activity. Currently, the majority of our panelists expect the Bank to stand pat at its last meeting of 2025 on 11 December and resume the easing cycle in 2026. That said, some panelists expect a further rate cut at the December meeting due to the dovish tone of the press release.

Panelist insight: Commenting on the outlook, Radhika Rao, analyst at DBS Bank, stated: “The central bank’s dovish commentary, impending growth risks and a negative output gap suggest that the door remains open for another cut in December […]. Exogenous forces are conducive, with a resumption in the US Fed rate cuts likely to preserve rate differentials.”

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