The Bangko Sentral ng Pilipinas (BSP) cut its policy rate by 25 basis points (bps) to 5.5 percent from 5.75 percent on Thursday due to easing prices of rice and many other commodities amid global weaker demand.

Accordingly, the BSP now imposes a 5 percent interest rate for overnight deposits and 6 percent for lending facilities.

BSP Governor Eli Remolona Jr. said the Monetary Board is considering further reductions in the policy rate due to projected manageable inflation.

The BSP projects an average inflation rate of 2.3 percent for this year, down from the 3.5 percent it estimated in its monetary policy meeting in February.

Similarly, the BSP reduced the inflation outlook to 3.3 percent from 3.7 percent. For 2027, the Central Bank projects 3.2 percent.

Remolona said cheaper rice prices will continue to support low overall inflation. Based on data from the Philippine Statistics Authority, rice inflation fell faster by 7.7 percent in March from 4.9 percent in February.

Lowest in 3 years

This slowed down overall inflation to 1.8 percent in March from 2.1 percent in February, the lowest in over three years and below the BSP’s minimum target of 2 percent.

BSP Assistant Governor of the Monetary Policy Sub-sector Zeno Abenoja added global oil prices might remain low following US President Donald Trump’s order to American firms to extract all fuels on US shores.

Despite Trump’s unpredictable tariff policies on imports to the US, Remolona said Philippine inflation will likely remain relatively low as only few Filipino exporters might pass tariff costs to consumers.

“We have relatively less trade than the big countries in the world,” Remolona said.

According to the Department of Trade and Industry, the share of exports to the Philippine economy has hovered below 30 percent post-pandemic. The global average is 46 percent.

“On balance, the more manageable inflation outlook and the risks to growth allow for a shift toward a more accommodative monetary policy stance,” Remolona said.

“We’ll still do it in baby steps or 25 bps at a time. But that’s not necessarily each meeting of the four more meetings left,” he added.

However, he warned higher prices of transport, utility, and meat might slow disinflation.

The Food and Agriculture Organization of the United Nations said meat prices rebounded in March due to stronger demand for the food item after Germany regained foot-and-mouth-disease-free status.