The Bangko Sentral ng Pilipinas (BSP) held an off-cycle meeting and decided to keep the Reverse Repurchase Rate (RRP) steady at 4.25%, citing intensifying supply-driven inflation and risks stemming from the Middle East conflict [1]. UOB’s Global Economics & Markets Research, represented by Julia Goh and Loke Siew Ting, expects the BSP to maintain a prolonged policy pause, with core inflation and second-round effects guiding future decisions. Fiscal policy is anticipated to play a larger role in mitigating the economic fallout from the ongoing Middle East conflict [1].
The BSP Governor, during the post-meeting briefing, did not rule out the possibility of additional off-cycle meetings if the Middle East conflict escalates and poses more immediate economic risks [1]. He also stated that the BSP stands ready to inject liquidity into the financial system if necessary and could further reduce the reserve requirement ratio (RRR), potentially to around 2.00% [1].
Persistently weak domestic demand and elevated living costs are cited as supporting factors for the extended policy pause, with the central bank expected to take a meeting-by-meeting approach while closely monitoring external developments [1].
CONCLUSION
The BSP’s decision to maintain the RRP at 4.25% reflects a cautious stance amid global uncertainties, particularly those arising from the Middle East conflict. Analysts expect an extended policy pause, with fiscal measures likely to play a larger role and the central bank prepared to act if conditions worsen. Market participants should anticipate continued vigilance and flexibility from the BSP in response to evolving external risks.