The Bangko Sentral ng Pilipinas (BSP) has reduced its Target Reverse Repurchase (RRP) Rate by 25 basis points to 4.75 percent in a move aimed at supporting economic activity. 

Announced on Thursday, 9 October 2025, this decision follows growing investor concerns over alleged rampant government corruption, with the stock market losing about P1.7 trillion in valuation over the last three weeks. 

Benchmark 

The RRP is the interest rate at which the BSP lends to banks. It serves as a benchmark for borrowing costs across the economy, including loans for businesses and consumers. 

When the rate is lowered, borrowing generally becomes cheaper, encouraging investment and spending, which can help boost growth. 

“This decision reflects our latest reading of economic conditions, as well as judicious adjustments to our model,” BSP Governor Eli M. Remolona Jr. said. 

Importance of business sentiments

“These adjustments reflect the new importance of business sentiment in light of the issues related to government infrastructure spending,” he added, referring to the investigations into anomalous flood control projects.

In the same decision, the Monetary Board also trimmed the overnight deposit rate to 4.25 percent and the overnight lending rate to 5.25 percent. 

These rates influence how much banks earn on deposits with the BSP and how much they pay when borrowing from it — key tools the BSP uses to manage liquidity in the financial system.

The BSP said the decision was supported by a benign inflation outlook, with price growth projected to remain within the government’s 2 to 4 percent target range. 

“Inflation expectations remain well-anchored,” Remolona said, adding that while possible power rate hikes and rice import tariffs could cause short-term pressures, overall risks to inflation are limited.

Softened domestic growth outlook 

However, the Monetary Board observed that the domestic growth outlook has softened. It cited weaker business sentiment due to governance concerns in public infrastructure spending, alongside persistent uncertainty in the global economy.

A rate cut typically signals a pro-growth stance, helping reduce financing costs for businesses and consumers. This can encourage investment and spending, potentially lifting employment and overall economic output — provided inflation remains manageable.