Philippine Central Bank Slashes Rates Amid Economic Uncertainty

June 25, 2025 | 22:00 EDT

Manila, Philippines — The Bangko Sentral ng Pilipinas (BSP) cut its key policy rate by 25 basis points to 5.25% on June 19, 2025, marking its second rate reduction this year. The move aims to bolster economic growth as inflation cools and global uncertainties loom. While the BSP projects confidence in its inflation outlook, questions linger about the efficacy of monetary easing in a volatile global landscape and the bank’s hands-off approach to the weakening peso.

The BSP’s decision aligns with expectations from economists, who forecasted the cut due to inflation slowing to its lowest in over five years. The central bank’s 2025 risk-adjusted inflation forecast stands at 1.6%, well below its 2-4% target range, giving policymakers room to stimulate growth (Nikkei Asia, 2025). BSP Governor Eli Remolona emphasized that the cut supports a Philippine economy grappling with sluggish GDP growth, exacerbated by global trade tensions and U.S. tariff threats. “We see deceleration in global economic activity,” Remolona noted, signaling caution despite the easing (PiQSuite, 2025).

Yet, the BSP’s optimism raises eyebrows. Critics argue that rate cuts alone may not address structural issues like weak consumer spending and export declines. The Philippine economy grew at a modest 5.7% in 2024, below the government’s 6-7% target, and global risks—such as U.S. trade policies under the Trump administration—could further dampen prospects (BusinessWorld Online, 2025). Skeptics question whether the BSP’s reliance on monetary tools overlooks deeper fiscal reforms needed to drive sustainable growth.

The BSP’s stance on the peso, which hit a 10-week low, adds fuel to doubts. Remolona dismissed aggressive currency intervention as “futile” in the face of a strong U.S. dollar, opting for minimal market involvement to maintain liquidity (Bloomberg, 2025). He acknowledged, however, that persistent peso depreciation could stoke inflation, prompting stronger action if needed (itradeph, 2025). This wait-and-see approach unsettles analysts who warn that a weaker peso erodes purchasing power, especially for import-reliant Filipinos. The BSP’s reluctance to act decisively contrasts with its proactive rate cuts, revealing a potential inconsistency in its strategy.

On a positive note, the BSP’s polymer banknote series earned international acclaim, winning the “Best New Banknote Series” award from the International Association of Currency Affairs on June 3, 2025. The series, launched in 2022 with the P1,000 note, introduces advanced security features and durability, reflecting the bank’s innovation in currency management (GMA News Online, 2025). Such achievements bolster the BSP’s credibility, but they do little to address immediate economic headwinds.

As the BSP navigates a fragile global environment, its actions signal cautious optimism. Rate cuts aim to spur growth, but their impact remains uncertain amid trade wars and currency pressures. Filipinos await tangible results, questioning whether the central bank’s policies will deliver stability or merely delay tougher challenges.

References
Bloomberg. (2025, June 18). Philippine Central Bank Chief Calls Peso Intervention Futile.
BusinessWorld Online. (2025, May 29). BSP to ease further to support economy.
GMA News Online. (2025, June 2). Philippine polymer bills win ‘Best New Banknote Series’.
Nikkei Asia. (2025, June 19). Philippine central bank cuts rates to boost economic growth.
PiQSuite. (2025, June 19). Philippine CBANK: 2025 risk adjusted inflation forecast at 1.6%.
itradeph. (2025, June 19). The Philippine central bank will intervene more actively if the peso’s weakness persists.