The Central Bank of the Philippines cut its benchmark interest rate by 25 bps to 4.5% during its final meeting of the year, marking the fifth straight reduction and bringing total cuts this year to 125 bps. The move aligns with market expectations and lowers borrowing costs to their lowest since October 2022, as a benign inflation outlook allows policymakers room to support growth. Inflation forecasts for 2026 and 2027 were slightly raised to 3.2% and 3.0%, remaining within the BSP’s 2%-4% target. The Monetary Board noted that domestic growth has weakened amid softer business sentiment, governance concerns, and lingering global trade uncertainty, though demand is expected to recover gradually as the effects of monetary easing and improved public spending take hold. The BSP also indicated that the easing cycle is nearing its end, with any additional cuts likely limited and guided by incoming data. Overnight deposit and lending rates were also adjusted to 4.00% and 5.00%, respectively.
