BSP eyes 50 basis point rate cut this year

Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. indicated a potential 50 basis point (bp) cut in policy rates this year, possibly delivered in two 25 bp increments in the first and second halves of the year.

Governor Remolona stated that 75 basis points of cuts might be too much, and a total easing of 100 bps for the full year could be excessive due to persisting inflation.

The BSP began its easing cycle in August last year, implementing a total of 75 bps in rate cuts by the end of 2024, bringing the benchmark rate to 5.75%.

The Monetary Board will hold policy-setting meetings bimonthly in 2025, reducing their frequency from seven to six meetings.

Despite economic growth of 5.2% in 2024 falling short of the DBCC's target, inflation is projected to remain within the BSP's 2.0% to 4.0% target range for 2025.

The central bank also aims to reduce the reserve ratio requirements (RRR) by another 200 bps this year, from seven percent to five percent, influenced by a sluggish economy, with discussions for this reduction possibly happening in June or July.