Citing steady domestic demand coupled with still-tame inflation, the Bangko Sentral ng Pilipinas (BSP) has delivered its widely expected third key policy rate cut, lowering it by a quarter of a point to five percent.

“The Monetary Board (MB) observed that domestic demand has held firm,” BSP Governor Eli M. Remolona Jr. said in a statement released on Thursday, Aug. 28.

“However, the impact of United States (US) policies on global trade and investment continues to weigh on global economic activity. This could temper the outlook for the Philippine economy,” Remolona said.

To date, the policy-setting MB has slashed the key interest rate by a total of 1.5 percentage points (ppt) from 6.5 percent before the easing cycle began in August last year.

For this year alone, the BSP has reduced the key interest rate by 75 bps across three consecutive policy meetings in April, June, and August.

Similarly, the central bank also reduced the overnight deposit rate to 4.5 percent from 4.75 percent previously, and the lending rate to 5.5 percent from 5.75 percent previously.

“Inflation expectations remain well-anchored. Meanwhile, possible electricity rate adjustments and higher rice tariffs could raise inflationary pressures over the policy horizon,” Remolona said.

According to the BSP, its inflation outlook remains “broadly unchanged,” with forecasts at 1.7 percent for 2025, 3.3 percent for 2026, and 3.4 percent for 2027.

“Emerging risks will continue to require close monitoring,” Remolona said, stressing that monetary policy will be adjusted in line with shifts in price pressures and economic growth.

“Going forward, the BSP will safeguard price stability by ensuring monetary policy settings remain conducive to sustainable economic growth and employment,” the central bank said.