Post by : Saif Rahman

The Bangko Sentral ng Pilipinas has announced its decision to keep interest rates unchanged for the moment, in light of a recent uptick in inflation and signs of deceleration in economic growth. Officials highlight this decision as a strategic balance between managing inflation and fostering economic stability.

Latest reports reveal that inflation reached 1.8% in December, marking the highest increase in nine months, compared to 1.5% in November. The surge is mainly attributed to rising costs in food and clothing, significantly impacting household budgets. Monthly prices also rose by 0.9% in December, the steepest jump in over a year.

Despite this recent rise, the average annual inflation for 2025 was recorded at 1.7%, the lowest since 2016. This suggests that price pressures remained relatively subdued throughout the year, despite a late surge.

However, data indicates a slowdown in economic growth. The central bank projects that the Philippine economy expanded by around 4.6% in 2025, down from a robust 5.7% in the prior year, falling short of government growth projections amid global economic challenges.

Governor Eli Remolona of Bangko Sentral ng Pilipinas stated that current economic conditions do not warrant further interest rate reductions at this time. While some minor adjustments may be possible, any future decisions will heavily rely on ongoing inflation and growth trends.

Throughout the past year, the central bank has actively worked to bolster the economy, cutting interest rates in five successive meetings to a benchmark of 4.5%, the lowest in three years. Rates have been lowered by a total of 200 basis points since August 2024, with officials believing that this cycle of easing is nearing its end.

The government has also revised its growth forecasts for the upcoming years, noting the risks posed by global economic conditions. Concerns persist around sluggish growth in major economies and ongoing uncertainties within international markets.

Central bank representatives have emphasized that any further monetary easing will be carefully constrained and heavily influenced by emerging data. Should economic growth significantly underperform, additional support measures could be considered; however, the current inflation trend necessitates a cautious approach going forward.

The clear message from the central bank is that interest rates will remain stable while officials survey economic activities and inflation closely, aiming to control prices while allowing for a measured recovery ahead.

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