BSP cuts key policy rate by 0.25% to 4.75%

The Bangko Sentral ng Pilipinas (BSP) unexpectedly lowered its key policy interest rate by 0.25 percentage point to 4.75 percent, marking the lowest rate in three years.

This decision, the fourth consecutive rate cut, was influenced by a weakened economic outlook and declining investor confidence, partly due to governance concerns in public infrastructure spending.

BSP Governor Eli Remolona Jr. cited softened growth outlook and dampened business sentiment, with fewer companies expanding operations.

The Monetary Board also reduced rates on the overnight deposit and lending facilities by 25 bps each to 4.25% and 5.25%, respectively.

This move surprised analysts, with most expecting a pause in monetary easing.

The central bank has now reduced borrowing costs by a total of 175 basis points since its easing cycle began in August 2024.

The peso weakened against the dollar, closing at P58.235 on Thursday following the announcement.

Low inflation was also cited as a reason for the rate cut, attributed to weaker demand.