The Bangko Sentral ng Pilipinas (BSP) delivered a widely anticipated interest rate cut at its final policy meeting of the year, lowering the benchmark rate to 4.5%—its lowest level in three years.
The Monetary Board reduced the rate by 25 basis points on December 11, matching forecasts from all but one of 27 economists in a Reuters poll.
The cut, earlier signaled by BSP Governor Eli Remolona, comes as a corruption scandal involving infrastructure projects weighs heavily on the economic outlook. The controversy has implicated public works officials, senators, and lawmakers, triggering protests and slowing infrastructure spending.
Remolona said the easing move was intended to cushion the economy amid weakened government spending and declining business confidence.
“The cut will revive economic activity a bit at a time when painful governance issues around infrastructure investments have weakened government spending, business confidence and domestic demand,” he said, adding that while the rate cut would not resolve the scandal, it could help “compensate” for its negative impact on investor sentiment.
With inflation subdued—averaging 1.6% in 2025, below the 2% to 4% target—the BSP said growth risks now outweigh price concerns. Inflation is projected to climb to 3.2% in 2026 before easing slightly to 3.0% in 2027.
Research firm Capital Economics echoed the need for stimulus, noting, “The economy is certainly in need of some support… We are still expecting two further 25 bps cuts” for 2026.
The BSP has now cut rates by a total of 200 basis points in the current easing cycle. Remolona remains confident the accommodative stance will bolster recovery in the coming year, though he acknowledged growth this year likely slowed to between 4% and 5%—well below the government’s 5.5% to 6.5% target and last year’s 5.6% expansion.