THE Bangko Sentral ng Pilipinas (BSP) cut its key policy rate by 25 basis points at its monetary policy meeting on Thursday, Feb. 19, 2026, bringing the target reverse repurchase (RRP) rate to 4.25 percent.
The central bank likewise adjusted the interest rates on its overnight facilities, lowering the deposit rate to 3.75 percent and the lending rate to 4.75 percent.
In a statement, the BSP said the inflation outlook remains manageable, although projections for 2026 were revised slightly upward, mainly due to temporary supply-side pressures. Inflation expectations, remain firmly anchored, with price growth seen returning close to the three-percent target by 2027.
The Monetary Board noted that economic growth has fallen short of the central bank’s expectations, weighed down by weaker domestic demand. While the latest indicators suggest activity may recover in the second half of the year, the pace of expansion will depend largely on how quickly business and consumer confidence improve.
Entrepreneur Steven Yu welcomed the rate cut, saying it comes at a critical juncture for the economy.
“The Monetary Board’s cut in the target RRP rate by 25 basis points is a positive and welcome development for business and the economy,” Yu said. “It will spur our economy to grow faster coming from a dismal fourth-quarter 2025 performance.”
He added that the timing of the move is crucial. “It is critical to implement this in the first quarter of 2026 to jumpstart robust economic activity while our inflation rate remains steady at two to three percent. All the data gathered by the Monetary Board point to the 25-basis-point cut as essential to achieving higher growth numbers in 2026.”
Yu also said the rate reduction could help offset uncertainty from political and geopolitical developments.
“Amid all the political noise and geopolitical developments, this move comes at an appropriate time to build business and investor confidence. With lower borrowing costs, there is renewed confidence to expand and invest, which will create jobs and augment livelihood opportunities,” he said.
Earlier, Metrobank said household expenditure continues to face headwinds, strengthening the case for monetary easing.
“A timely rate cut could provide the necessary support to reinvigorate growth momentum,” Metrobank said in its latest market outlook published on Wealth Insights.
While economic activity is expected to gain traction in the second half of 2026, the bank noted that near-term vulnerabilities warrant a proactive response from the central bank.
A 25-basis-point reduction would narrow the policy rate gap between the Philippines and the United States to 50 basis points. While a tighter interest rate differential could influence capital flows, Metrobank said currency movements may hinge more on business and consumer confidence than on rate spreads alone.
Looking ahead, the bank said further easing in April remains possible if inflation stays subdued. However, sustained increases in rental and utility prices could limit additional cuts.
“Monetary policy remains data-dependent,” Metrobank said. “While supporting growth is the immediate priority, the BSP will continue to balance price stability and financial market considerations in the months ahead.” / KOC