The Bangko Sentral ng Pilipinas (BSP) on Thursday further eased its policy rate by 25 basis points to 5.75 percent as it expects inflation to remain manageable as rice prices moderate.

Accordingly, BSP set interest rates on overnight deposits at 5.25 percent and on lending facilities at 6.25 percent.

“Inflation is projected to stay within the target range over the policy horizon. The impact of lower import tariffs on rice remains the main downside risk to inflation,” BSP Governor Eli Remolona Jr. said.

BSP aims to keep inflation within two to four percent, and delivered a total reduction of 75 basis points this year.

The Philippine Statistics Authority reported inflation last month settled at 2.5 percent from 2.3 percent in October and 1.9 percent in September, following several typhoons.

Despite agricultural damage from bad weather, rice prices fell in November, with a 5.1 percent inflation from 9.6 percent on an annual basis as rice supply in the market remained sufficient.

To ensure this, the government in July started imposing a lower tariff on imported rice at 15 percent from 35 percent.

Inflation outlook raised

However, BSP slightly raised its risk-adjusted inflation for next year to 3.4 percent from 3.3 percent announced in the meeting of its Monetary Board in October.

For 2026, the central bank maintained the risk-adjusted inflation at 3.7 percent.

“Risks include petitions for transport fare and electricity rate adjustments. Although, international prices have come down,” BSP Assistant Governor Zeno Ronald Abenoja said.

Abenoja said BSP will continue to monitor external factors as incoming US President Donald Trump’s policies of higher tariffs on all imports threaten to increase global inflation.

Economists said the higher tariffs might limit supplies of raw materials from importers or force businesses to pass tariff payments to consumers, pushing up prices of finished goods.

Remolona said BSP’s still elevated policy rate will allow its Monetary Board more flexibility to adjust the rate as local and global economic conditions change.

“We’re still somewhat on the tight side. The reason we’re taking baby steps is that we’re not sure about inflation,” he said.

As of yesterday, Remolona said a total 100 basis point-cut for next year will be “too much,” given the aforementioned risks.

“The within-target inflation outlook and well-anchored inflation expectations continue to support the BSP’s shift toward less restrictive monetary policy,” he said.