BSP Considers Interest Rate Cut in February 13 Policy Meeting

BAGUIO CITY – The Bangko Sentral ng Pilipinas (BSP) is considering a policy rate cut in its upcoming Monetary Board meeting on February 13, depending on key economic indicators, BSP Governor Eli Remolona Jr. said Friday.

Factors Influencing the Decision

📌 Economic Growth Below Target:

• The Philippine economy grew by 5.2% in Q4 2024, bringing full-year GDP growth to 5.6%, below the government’s 6.0% to 6.5% target range.
• This marks the second consecutive year the country missed its economic target.

📌 Negative Output Gap:

• The output gap (difference between actual and potential GDP) remains negative, meaning the economy is growing below its full capacity, which could support a rate cut.

📌 Upcoming Inflation Data:

• The Philippine Statistics Authority (PSA) will release January inflation figures on February 5.
• BSP projects inflation to settle between 2.5% and 3.3%, with food prices, higher water rates, and sin taxes adding pressure, while lower rice and electricity costs may help ease inflation.

📌 Federal Reserve Influence:

• BSP is also considering the US Federal Reserve’s recent decision to pause rate adjustments, though Remolona emphasized that the BSP does not simply follow the Fed’s moves.

Monetary Policy Outlook

• The Monetary Board will meet earlier than scheduled on February 13, as Governor Remolona will attend the Financial Action Task Force Plenary in Paris from February 17 to 20.
• In 2024, BSP lowered rates three times (August, October, and December), cutting a total of 75 basis points (0.75%).

A potential rate cut in February 2025 could provide stimulus for economic growth, given the slower-than-expected expansion in 2024.