‘What this ultimately signals is a central bank moving forward with its core priorities: anchoring inflation, supporting growth and letting the peso breathe.’
BANGKO Sentral ng Pilipinas Governor Eli Remolona Jr. has finally put policy rate easing back on the table — this time, explicitly.
After months of measured silence and cautious signals, the governor has now opened the door to a potential policy rate cut, even by a token fraction of a percentage point, when the Monetary Board meets again on August 28.
That would be the clearest step yet in a broadly telegraphed plan to reduce benchmark rates by a total of 50 basis points from then until the year-end.
It’s a pragmatic pivot — one that suggests the BSP sees enough daylight to move without flinching. The policy narrative is evolving from risk aversion to cautious optimism.
Inflation cooled to an average of 1.8 percent for the year as of June, sitting comfortably below the BSP’s 2–4 percent target range.
Growth remains impressive. Second-quarter GDP is expected to edge higher, within the 5.6 to 6.0 percent range, signaling resilience despite global economic crosswinds and domestic fiscal constraints. And although the peso has softened to around P58 against the dollar, Remolona noted it remains within the BSP’s tolerance band: “It hasn’t been that bad,” he said.
In short, the economic climate is looking “just right.” And that’s how the governor described it — Goldilocks territory: not too hot, not too cold. He considers the current 5.25 percent policy rate close to neutral.
The caveat? “Our estimates of the Goldilocks rate are imprecise,” Remolona admitted. But the broader message is clear: easing is in sight.
This comes after a cumulative 125 basis-point reduction in the reserve requirement ratio (RRR) since August last year — the start of a cautious easing cycle, albeit through liquidity tools rather than headline rates.
The BSP’s next moves matter. There are only three policy meetings left in 2025 — August 28, October 9, and December 11. That leaves a narrow runway to execute a gradual shift in monetary stance.
Remolona’s signal is rooted not just in domestic data but also in external cues. He flagged rising global uncertainty, including a new 19 percent US tariff on Philippine exports. The direct trade impact may be limited — “We’re not a big trading economy,” he says — but the signal from Washington hints at softening global demand.
For an economy still largely driven by domestic consumption, these headwinds merit watchful calibration.
To be fair, Remolona is not navigating blindly. The framework is clear: If inflation stays low, growth holds firm, and external risk remains contained, the easing cycle resumes — likely this August. And it’s unlikely to be a one-and-done move.
What this ultimately signals is a central bank moving forward with its core priorities: anchoring inflation, supporting growth and letting the peso breathe. It’s a welcome recalibration — one that calls for transparency, agility and continued discipline.
