Philippines Central Bank Cuts Rates First Time in Nearly Four Years to Support Economy
Central Bank Cuts Benchmark Overnight Reverse Repurchase Rate to 4.25%
The Philippine central bank has slashed interest rates for the first time in nearly four years as it looks to bolster economic growth. The Bangko Sentral ng Pilipinas announced after a policy meeting on Thursday, August 15, 2024, that it had cut its benchmark overnight reverse repurchase rate by 25 basis points to 4.25%.
The bank, known as the BSP, said:
- The decision was "consistent with its forward guidance and assessment of the inflation outlook and risks to domestic economic growth."
- The BSP sees "signs of a slowdown in global economic growth amidst heightened geopolitical tensions and lingering supply-side constraints."
- "Domestic economic activity has also moderated, with growth in the second quarter of 2024 settling within the BSP's forecast range but slower than the previous quarter."
The rate cut comes as the Philippine economy is facing a number of challenges, including rising inflation and a slowdown in global growth. The BSP has been raising interest rates since May 2022 in an effort to contain inflation, which has risen to a 14-year high of 6.4% in July 2024.
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However, the BSP now believes that the balance of risks has shifted towards growth. The global economy is slowing down, and the Philippine economy is also starting to moderate. The BSP is therefore cutting rates in order to support growth and prevent the economy from slowing down too much.
The rate cut is likely to be welcomed by businesses and consumers. Lower interest rates will make it cheaper for businesses to borrow money and invest, and it will also make it cheaper for consumers to buy goods and services.
The BSP's decision is in line with the actions of other central banks around the world. The US Federal Reserve has also cut interest rates this year, and the European Central Bank is expected to follow suit soon.
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