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Investing.com -- In an unexpected move, the Philippine central bank, Bangko Sentral ng Pilipinas (BSP), has decided to maintain its policy rate, signaling a pause in its easing cycle. The decision comes as the bank adopts a more cautious stance in response to increasing macroeconomic risks.
The BSP kept its benchmark overnight reverse repurchase rate at 5.75%, as announced by Governor Eli Remolona on Thursday. The institution also held its benchmark lending rate steady at 6.25%.
According to the governor, the current risks and uncertainty surrounding the economic outlook justified the decision to keep rates on hold.
This decision was unanticipated by all 13 economists surveyed by The Wall Street Journal. The Southeast Asian economy’s recent data shows a lukewarm expansion last year, with inflation appearing manageable and within target.
Before this pause, the BSP had been steadily reducing rates since August of the previous year. This was despite the risk of exerting pressure on the Philippine peso and in the face of slower and shallower easing expectations by the Federal Reserve.
Fed Chair Jerome Powell announced this week that the U.S. central bank does not need to hasten the lowering of interest rates.
During the BSP’s meeting in December, Governor Remolona stated that, unless there were unexpected surprises in economic data, the policymakers would continue to take "baby steps" in reducing borrowing costs. He reiterated on Thursday that the BSP would continue to depend on data to ensure price stability.
The central bank also adjusted its risk-adjusted inflation forecast for 2025 up to 3.5%, while retaining its 2026 projection at 3.7%.
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