Manila, Aug 15 (IANS): The Philippine central bank said during a monetary policy meeting on Thursday that it has decided to cut its target reverse repurchase rate by 25 basis points to 6.25 per cent.

Interest rates on the overnight deposit and lending facilities were accordingly adjusted to 5.75 per cent and 6.75 per cent, respectively, the bank said in a press note, Xinhua news agency reported.

It was the first rate cut since November 2020.

Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona told mediapersons that the country's headline inflation is projected to trend downward to within the government's 2-4 per cent target range despite uptick in July.

"The risk-adjusted inflation forecasts for 2024 and 2025 now stand at 3.3 per cent and 2.9 per cent, respectively," Remolona said.

Remolona said the balance of risks to inflation outlook continued to lean toward the downside for 2024 and 2025, with a modest tilt to the upside for 2026.

"The downside risks are linked mainly to lower import tariffs on rice, while upside risks could come from higher electricity rates and external factors," he said.

The central bank's monetary board expected domestic demand prospects to hold firm. Despite tight financial conditions, second-quarter gross domestic product growth has been solid, and unemployment rate has declined.

"Public investment, alongside easing price pressures and robust employment conditions, is expected to support economic activity," Remolona said.

Remolona said the current macroeconomic outlook supports a calibrated shift to a less restrictive monetary policy stance with inflation on a target-consistent path.

Nonetheless, he added that the monetary authorities remain mindful of lingering upside risks to prices.