Fitch Ratings Lauds BSP Inflation Handling

Fitch commended the progress in reducing inflation in the Philippines, which averaged 3.2 percent in the first 11 months of 2024 compared to 6.0 percent last year.

In response to the more favorable inflation environment, the BSP cut interest rates by 25 basis points each in August and October 2024 to support economic growth. I Photo: Eli M. Remolona Jr. X

The statement was made in a credit update report separate from a press release announcing a credit rating action.

To bring inflation back within the target range of 2.0-4.0 percent, the Bangko Sentral ng Pilipinas (BSP) raised interest rates three times last year, totaling 100 basis points. The last hike was an off-cycle increase of 25 basis points in October 2023.

Since then, inflation has slowed, settling at 2.5 percent in November 2024.

In response to the more favorable inflation environment, the BSP cut interest rates by 25 basis points each in August and October 2024 to support economic growth. Fitch forecasts Philippine economic growth to accelerate to 5.7 percent this year, 5.9 percent in 2025, and 6.2 percent in 2026.

Meanwhile, the BSP is working to enhance the transmission of monetary policy through initiatives like promoting capital market development.

Collaborating with the banking industry, the BSP launched Peso Interest Rate Swaps (Peso IRS) to boost trading and liquidity in local bonds and make them more accessible to both local and international investors.

Fitch’s report follows S&P’s revision of the Philippines’ BBB+ rating outlook to positive in November and R&I’s upgrade of the country’s rating to A- in August.