Bangko Sentral cuts policy rate to 4.25% after slower than expected GDP growth in 2025

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) once again slashed the country’s interest rates on Thursday, February 19, by 25 basis points, bringing the policy rate to 4.25%.

This is the ninth time that the central bank cut interest rates since it began its easing cycle in August 2024.

BSP Governor Eli Remolona Jr. said that while the monetary authority’s inflation outlook remains manageable, economic growth had been slower than expected as the flood control projects scandal hampered consumer and investor confidence.

“Our decision today may actually help to restore confidence, boosting investment and consumption. The pace of economic recovery will depend on how quickly confidence returns,” he said.

Interest rates are one of many tools a central bank can use to control inflation. A lower interest rate means cheaper borrowing costs, encouraging people to spend more and stimulate the economy.

The Marcos Jr. administration once again missed its economic growth targets for the third straight year in 2025, with the economy growing 4.4% amid a contraction in government infrastructure spending.

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Remolona also admitted that investor and consumer confidence played a much bigger role in economic growth than they expected.

“When the flood control scandal broke out, we recalibrated our models to take account of confidence. I think the recalibration wasn’t enough to anticipate what actually happened in Q4. So now, we have some further work to do, and we now realize that it’s a bigger factor than we thought,” he said.

The BSP forecast that the economy will rebound by the second half of the year as investor and consumer confidence begin to show signs of return. Initial forecasts of the BSP show that the economy may grow 4.6% in 2026, but the monetary authority noted that this figure depends on the rebound of consumer and investor confidence moving forward.

Remolona said monetary policy outlook is now less certain and hinges on how soon confidence will return. They also continue to study the impact confidence has on the economy.

“Combine those two things that makes us less certain of where the economy is heading in the next quarter or so,” he said. – Rappler.com