The Bangko Sentral ng Pilipinas (BSP) kicked off long-awaited rate cuts this week, trimming its policy rate by 25 basis points to 6.25%. It is the first time in more than three years that borrowing costs have gone down, a move that signals a shift from fighting inflation toward fueling growth.
BSP Governor Eli Remolona Jr. explained that the decision rested on a clear sign: inflation has cooled. Prices in July rose just 2.1% from a year earlier, the slowest pace since 2019 and well within the bank’s 2–4% comfort zone. With prices stable, he said, the central bank can “lend a hand to growth without losing sight of risks.”
Rate cuts aim to fuel stronger growth
The timing of the rate cuts is not accidental. The economy has been gaining traction again, expanding 6.7% in the second quarter—its best showing in a year—on the back of strong farm harvests and steady household spending. Lower rates are expected to feed this momentum by making loans cheaper for small businesses, farmers, and families.
But the BSP is not throwing caution to the wind. Officials emphasized that further moves will depend on how the global picture unfolds. Oil prices, regional tensions, and shifts in U.S. monetary policy could all sway inflation in the coming months. Any easing from here, they said, will be done “step by step.”
Trade and public sentiment
Beyond interest rates, trade policy is also shaping the country’s outlook. Talks in July between Manila and Washington led to modest tariff adjustments, giving Philippine farm goods a slightly easier path into the U.S. market. While the gains were limited, the shift is seen as a welcome chance for local exporters, particularly if credit becomes more accessible thanks to the rate cuts.
On the ground, economic debates often blend with public sentiment. Just this week, a nationwide survey showed many Filipinos worry about the flood of smuggled Chinese products. For local producers already squeezed by unfair imports, cheaper financing could make the difference between survival and closure.
What comes next
Most economists expect at least one or two more cuts before the year ends, likely totaling 25 to 50 basis points. Regional neighbors such as Indonesia and Thailand are moving in the same direction, suggesting Asia’s central banks see growth as the bigger priority now.
