THE Bangko Sentral ng Pilipinas (BSP) on Thursday, Dec. 11, 2025, trimmed its key interest rate by 25 basis points, marking another step in its easing cycle as inflation remains subdued and economic momentum continues to soften.
At its policy meeting, the Monetary Board reduced the target reverse repurchase (RRP) rate to 4.50 percent. Rates on the overnight deposit and lending facilities were likewise lowered to four percent and five percent, respectively.
The BSP said inflation remains benign, with expectations “firmly anchored.” Its updated forecasts show consumer price growth inching up to 3.2 percent in 2026 and three percent in 2027, still within the central bank’s two to four percent target range.
However, the Monetary Board flagged weaker prospects for domestic economic activity. Business sentiment has continued to deteriorate amid governance concerns and uncertainty over global trade policies, it said. The central bank expects domestic demand to recover gradually as looser monetary conditions gain traction and as the “pace and quality of public spending” improve.
The BSP signaled it is close to wrapping up its policy easing, noting that future rate cuts will “likely be limited” and remain dependent on incoming data.
“Looking ahead, the BSP will ensure that overall policy settings remain consistent with maintaining price stability conducive to sustainable economic growth,” the central bank said.
US cut interest rate by 25 basis points
Meanwhile, the U.S. Federal Reserve on Wednesday decided to lower the target range for the federal funds interest rate by 25 basis points to 3.5 to 3.75 percent, marking its third rate cut this year.
The decision was approved by a 9-3 majority vote of the Federal Open Market Committee (FOMC), marking the first three-dissent meeting since September 2019, which highlighted the committee’s internal divisions on the pace of monetary easing.
Widely anticipated cut
The latest move was widely anticipated before the announcement, with market-based probabilities at around 89 percent for the 25-basis-point reduction, as indicated by the CME FedWatch Tool.
“Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months,” said the FOMC in a statement.
The FOMC highlighted that economic activity has continued to expand at a moderate pace, with job gains slowing this year and the unemployment rate edging up through September.
It added that inflation has moved up since earlier in the year and remains somewhat elevated, underscoring the committee’s long-term goal of achieving two percent inflation over the longer run.
Rate-cut pause expected
Looking ahead, the Federal Reserve emphasized a data-dependent approach.
“In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” said the FOMC in the statement.
The language was seen as a signal that the Fed would likely pause rate cuts for some time.
Powell described the current stance as placing the Fed “well positioned to wait and see how the economy evolves.”
“With the jobs part of the Fed’s mandate looking more troubling ... we see the Fed cutting rates twice in 2026 with 25bp cuts forecast for March and June,” said ING bank in a note on Wednesday. / KOC / XINHUA