In a significant monetary policy shift, the Bangko Sentral ng Pilipinas (BSP) reduced its overnight target reverse repurchase rate to 5.75% on December 19, 2024. This marks the third consecutive meeting where the BSP has implemented a quarter-point reduction, reflecting a broader trend of easing monetary policy in response to economic conditions [102f2b68].
The decision aligns with the findings of a Bloomberg survey, where 22 out of 24 economists anticipated this move, as inflation has remained well within the BSP's target range of 2% to 4% for the past four months [102f2b68]. However, the central bank's Governor Eli Remolona has indicated a cautious approach moving forward, suggesting that a total reduction of 100 basis points in 2025 may be excessive, given the current economic landscape [102f2b68].
Economic growth in the Philippines has shown signs of slowing, prompting the BSP to act. Despite the rate cuts, the peso remains near a record low of 59 to the dollar, raising concerns about the currency's stability [102f2b68]. The BSP has also noted potential upside risks to inflation stemming from rising transport fares and electricity rates, alongside external geopolitical risks that could impact the economy [102f2b68].
This decision by the BSP comes in the context of other central banks, such as the Bank of Japan and the US Federal Reserve, which have also made recent adjustments to their monetary policies, reflecting a global trend of navigating economic challenges [102f2b68]. As the situation evolves, the BSP's future actions will be closely monitored by economists and investors alike, particularly in light of the delicate balance between stimulating growth and managing inflation [102f2b68].