Philippine Central Bank Signals Steady Interest Rates as Inflation Rises and Growth Slows

The Bangko Sentral ng Pilipinas (BSP) is expected to keep interest rates at their current levels after inflation accelerated in December while economic growth showed signs of slowing, according to BSP Governor Eli Remolona. The Philippine central bank’s stance reflects a cautious approach as it balances inflation risks with the need to support economic activity.

Latest data from the Philippine Statistics Authority showed inflation rose to 1.8% in December, the fastest pace in nine months, driven mainly by higher food and clothing prices. This marked an increase from the 1.5% inflation rate recorded in November. On a month-on-month basis, consumer prices climbed by 0.9% in December, the sharpest increase since September 2023. Despite the recent uptick, average full-year inflation for 2025 stood at 1.7%, the lowest level since 2016, suggesting overall price pressures remain relatively contained.

Governor Remolona noted that Philippine economic growth may have slowed to 4.6% in 2025, down from 5.7% in the previous year and below the government’s revised growth target. He said that, based on current data, the BSP is unlikely to cut interest rates further in the near term. While the central bank is close to its desired policy rate level, Remolona acknowledged there remains a possibility of limited additional easing if economic growth falls below 5%.

The Philippine government has recently lowered its growth outlook to 5%–6% for the year and 5.5%–6.5% for 2027, citing global economic headwinds and external risks. These challenges have added pressure on policymakers to carefully calibrate monetary policy.

The BSP reduced its benchmark interest rate for five consecutive meetings last year, bringing the policy rate to a three-year low of 4.5%. Since August 2024, the target reverse repurchase rate has been cut by a total of 200 basis points. However, the central bank has indicated that its easing cycle is nearing an end and that any further policy adjustments will depend on incoming economic data.

The BSP’s next monetary policy meeting is scheduled for February 19, when officials will reassess inflation trends, growth prospects, and global economic conditions before deciding on the future path of interest rates.