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Investing.com -- The central bank of the Philippines, Bangko Sentral ng Pilipinas (BSP), announced a cut in its policy rate on Thursday. The move was anticipated, given the recent decrease in domestic inflation and global trade instability.
The bank's benchmark overnight reverse repurchase rate was reduced to 5.50%, according to Governor Eli Remolona. Additionally, the central bank lowered its benchmark lending rate to 6.00%.
The decision aligns with predictions made by a majority of economists, given the recent data on Philippine inflation that supported the case for a cut. The potential impact of new U.S. tariffs also bolstered the argument for a rate cut.
The Southeast Asian economy is facing a potential 17% duty on its goods under reciprocal tariffs proposed by President Trump, although these have been currently put on hold.
Governor Remolona confirmed that trade tariffs played a role in the BSP's decision to cut rates. He further indicated that the bank plans additional easing measures this year. While he did not specify the number of planned cuts, he confirmed that the BSP would continue with its approach of 25-basis-point reductions, which he referred to as "baby steps".
The central bank also stated that a more manageable inflation outlook in the Philippines allows for a more accommodative monetary stance. The BSP reduced its risk-adjusted inflation forecast for this year to 2.3% from 3.5%, and decreased next year's forecast to 3.3% from 3.7%.
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