The Bangko Sentral ng Pilipinas (BSP) maintained the Philippines' benchmark interest rate at 5.75% in its February 2025 policy meeting, citing uncertainties surrounding global trade policies as a key factor. Governor Eli Remolona Jr. explained that the Monetary Board opted for a wait-and-see approach to assess the impact of global developments on the domestic economy before further easing monetary policy. The BSP, however, confirmed its intention to reduce banks' reserve requirement ratio (RRR) to 5% and hinted at a possible earlier-than-expected implementation.
The Bangko Sentral ng Pilipinas ( BSP ) kept the Philippines ' benchmark interest rate steady at 5.75% during its first policy meeting of 2025. BSP Governor Eli Remolona Jr. explained that the Monetary Board decided to hold off on further rate cuts to closely observe the effects of global policies on the domestic economy. While several analysts anticipated a 0.25% rate reduction, Remolona cited uncertainties surrounding trade policy as a key factor in the decision.
He acknowledged that the Monetary Board would have favored further rate reductions if not for these uncertainties. Remolona emphasized that the BSP is still within its easing cycle, having previously raised key interest rates during the pandemic. The central bank slightly revised its risk-adjusted inflation forecast for the year upwards to 3.5% from 3.4% projected in its December policy meeting. This upward adjustment is partly attributed to the impact of nominal minimum wage increases across regional wage boards in 2024, which average around 8.1%. However, this inflationary pressure may be partially offset by a decline in rice prices, which experienced a deflation rate of -2.3% in January.The BSP maintains its intention to lower banks' reserve requirement ratio (RRR) to 5% from the current 7%. Governor Remolona suggested that this reduction could occur sooner than anticipated, possibly even before mid-year. The RRR is a crucial policy tool for managing the economy's health, as it dictates the percentage of a bank's total deposits that must be held in reserve rather than lent out. Lowering the RRR aims to stimulate economic activity by freeing up more funds for lending. Remolona stressed that the RRR cut is a structural policy change, not a temporary measure like the policy rate. Once implemented, the BSP intends to maintain the lower RRR level for the foreseeable future
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