Philippine Central Bank Pauses Rate Cuts, Plans Reserve Requirement Reduction
On Thursday, the Philippine central bank (BSP) maintained the benchmark interest rate at 5.75%, signaling a temporary pause in the easing cycle amid rising global uncertainties.
Despite the hold, Governor Eli Remolona reaffirmed that borrowing costs will continue to decline. The BSP intends to cut the reserve requirement ratio for lenders by 200 basis points to 5% in the first half of the year.
"The timing is still being discussed, but I think it will be fairly soon, maybe sooner than the middle of the year," Remolona said.
The BSP emphasized that it remains in an easing cycle and has no intention of tightening monetary policy. Remolona reiterated his earlier projection of a 50 basis point reduction in the key rate this year, with a potential cut at the April meeting.
Global uncertainties, including the impact of U.S. tariffs, have prompted the BSP to recalibrate its models, Remolona explained. "We are facing an unusual phenomenon in terms of the uncertainty of policies that will be put in place," he said.
The decision coincided with the Federal Reserve's announcement that it considers further rate hikes to control inflation. Remolona emphasized that the BSP's actions are not solely influenced by the Fed but rather by domestic economic conditions.
Despite the surprise decision to hold rates, the Philippine peso gained against the dollar after the announcement. The BSP's next policy meeting is scheduled for April 3.