Philippine Central Bank Cuts Rate as Expected

The Central Bank of the Philippines reduced its benchmark interest rate by 25 bps to 4.25% during its February 2026 meeting, as widely expected, in response to manageable inflation and weaker-than-expected economic growth. While the inflation outlook remains contained, forecasts for 2026 were revised slightly higher due mainly to temporary supply-side pressures, with inflation still projected to return close to the 3% target by 2027 as expectations remain well anchored. Meanwhile, the central bank noted that economic growth has undershot earlier projections amid softer domestic demand, although recent indicators suggest activity could recover in the second half of the year. Policymakers emphasized that future policy decisions will remain data-dependent, particularly on inflation developments. The interest rates on the overnight deposit and lending facilities were also adjusted to 3.75% and 4.75%, respectively.