The central bank of the Philippines has cut interest rates four times in a row this year, and government corruption scandals may be the main cause

The Central Bank of the Philippines cut its key policy interest rate by 25 basis points to 4.75%. This is the fourth consecutive interest rate cut by the central Bank of the Philippines this year.

Meanwhile, the overnight deposit and loan interest rates were respectively reduced to 4.25% and 5.25%. The central bank of the Philippines had previously cut interest rates by 25 basis points in April, June and August this year. Since last year, the central bank of the Philippines has cumulatively cut the key policy rate by 175 basis points.

China News Service quoted the Philippine Central Bank's announcement on Thursday (October 9) as saying that the continued stability of the inflation outlook was an important basis for this interest rate cut. According to the latest forecast, the full-year inflation expectation for the Philippines in 2025 is 1.7%, which is consistent with the previous prediction. Inflation expectations for 2026 and 2027 are 3.1% and 2.8% respectively, down 0.2 and 0.6 percentage points from previous forecasts.

Previously, in a Bloomberg News survey of 26 economists, only seven predicted this move. The rest of the economists expect the central bank of the Philippines to suspend the easing cycle that was initiated over a year ago.

The Philippine peso's decline once expanded to 0.64% to 58.32, underperforming other Asian currencies. Over the past month, the peso has dropped by 2%. Many economists believe that the weakening of the peso may lead the central bank to keep interest rates unchanged.

Meanwhile, the Central bank of the Philippines said that the weakening outlook for domestic economic growth has also driven this policy choice. The central bank of the Philippines pointed out that the recent successive exposure of corruption scandals in flood control projects has weakened market confidence and investment expectations, and the government is "highly likely" to fail to achieve the economic growth target of 5.5% to 6.5% this year.

Before this unexpected decision, the public launched a large-scale protest over the alleged misuse of billions of dollars that were supposed to be used in flood control projects. The exposure of ghost projects and false contracts has implicated some lawmakers who deny any misconduct, and the government's spending on large-scale projects may slow down to conduct stricter reviews, thereby curbing economic growth in the short term.

The central bank of the Philippines also disclosed that it does not rule out announcing another interest rate cut at its last policy meeting in December this year.