Philippine Central Bank Cuts Rates in Latest Bid to Support Growth

Why It Matters

The rate cut aims to revive domestic demand and sustain growth amid lingering confidence gaps, positioning the Philippines for a more resilient recovery. Continued easing could lower financing costs, boost investment, and stabilize the peso, influencing regional capital flows.

Key Takeaways

• BSP cuts policy rate to 4.25% after nine reductions
• Inflation at 2% stays within 2‑4% target range
• Peso strengthens to 57.7 per dollar, signaling market confidence
• Growth forecast 4.6% 2026, 5.9% by 2027
• Governor says further cuts depend on consumer confidence rebound

Pulse Analysis

The Philippines’ latest monetary‑policy move reflects a delicate balancing act between supporting growth and anchoring inflation expectations. By trimming the benchmark rate to 4.25%, the BSP reinforces its commitment to a accommodative stance that has already seen the peso appreciate against the dollar. A stable 2% inflation rate, well within the central bank’s 2‑4% corridor, provides the fiscal space needed for additional cuts without jeopardising price stability. This environment encourages lower borrowing costs for households and businesses, potentially reigniting consumption that stalled after the 2025 infrastructure scandal.

Growth prospects remain modest but pivotal. The BSP’s projection of 4.6% GDP expansion for 2026 falls short of the government’s 5.5‑6.5% target, underscoring persistent demand weakness. Analysts argue that a gradual easing trajectory could bridge this gap by stimulating credit flow and restoring investor confidence. Regional peers, such as Indonesia and Vietnam, have already begun tapering stimulus, making the Philippines’ policy flexibility a competitive advantage for attracting foreign direct investment and sustaining export‑driven sectors.

Looking ahead, the central bank’s future path hinges on measurable improvements in consumer sentiment and private‑sector investment. Should confidence rebound, the BSP may deliver another 25‑basis‑point cut, reinforcing momentum toward its 2027 growth goal of 5.9%. However, external shocks—particularly commodity price volatility or a resurgence of fiscal deficits—could prompt a more cautious stance. Market participants should monitor confidence indicators, peso dynamics, and inflation trends to gauge the likelihood of further easing and its implications for the broader Southeast Asian economy.

Philippine central bank cuts rates in latest bid to support growth

Gov. Remolona says end to easing policy will depend on return of confidence · By RAMON ROYANDOYAN · February 19 2026 15:43 JST (updated February 19 2026 18:36 JST)

MANILA — The Philippine central bank cut its key interest‑rate benchmark by 25 basis points Thursday, continuing its monetary‑easing cycle to support domestic economic growth. Following the Bangko Sentral ng Pilipinas’ first rate‑setting meeting this year, the overnight repurchase rate now stands at 4.25%.

The central bank’s actions have been crucial in supporting what has been a trying year for the Philippine economy, after a high‑profile infrastructure corruption scandal dampened consumer and investor sentiment in the second half of 2025.

The decision also came as the Philippine peso rebounds from its all‑time low. The peso rose to 57.7 per dollar last week, its strongest level since last September, after weakening to near 59.7 in mid‑January.

“There can be another rate cut, but we’ll see,” the central bank’s governor, Eli Remolona, said on Feb. 11, noting that fourth‑quarter gross domestic product growth, at 3.0 %, had been a surprise since it fell below bank estimates.

“If we can help on the demand side and still keep inflation low, then of course we’ll help,” Remolona added.

The BSP’s easing cycle began in August 2024 with a cut from 6.5 % to 6.25 %, clawing back pandemic‑era measures meant to rein in consumption and temper consumer‑price growth. Despite this, price pressures remain contained as inflation only rose to 2.0 % in January, at the lower end of the central bank’s annual target range of 2 % to 4 %.

A Reuters survey showed that 25 of 27 economists polled forecast the central bank would cut the overnight borrowing rate by 25 bps.

In a press conference after the policy announcement, Remolona was tight‑lipped over whether the monetary‑easing cycle would end soon, noting that the situation is “conditional on what happens to confidence and growth.”

The central bank has taken a total of nine cuts to bring the policy rate to its current level.

“[Whether easing will stop] depends very much on whether confidence comes back … that’s a big ‘if,’” Remolona said, referring to investor and consumer sentiment. “The outlook for policy is less certain.”

Driving the central bank’s sentiment was the pace of growth of the domestic economy in 2025, which averaged 4.4 % and fell below the government’s target of 5.5‑6.5 %.

The BSP expects economic growth in the Philippines to average 4.6 % this year, and accelerate to an average of 5.9 % in 2027.

Domini Velasquez, chief economist at Manila‑based Chinabank, noted the BSP’s growth projection for 2026 “underscores lingering softness in domestic demand.”

“If realized, this pace of expansion would be weaker than what is typically associated with a decisive rebound and may justify further policy accommodation to reinforce momentum,” she told Nikkei Asia.

Velasquez added that since the BSP is emphasizing risks to economic growth, “the policy environment appears increasingly conducive to further easing should macro conditions warrant it.”