BSP hikes rates anew in ‘preemptive move’

MONETARY authorities raised key interest rates by another quarter-point on Thursday, citing the need to stave off the inflationary impact of a severe El Niño and potential minimum wage hikes.

MONETARY authorities raised key interest rates by another quarter-point on Thursday, citing the need to stave off the inflationary impact of a severe El Niño and potential minimum wage hikes.

The Bangko Sentral ng Pilipinas’ benchmark rate now stands at 5.0 percent while those for its overnight deposit and lending facilities are at 4.5 percent and 5.5 percent, respectively.

“Today’s rate hike was a preemptive move,” BSP Governor Eli Remolona told reporters following a meeting of the central bank’s policymaking Monetary Board, adding that they were “hoping that we won’t need another rate hike. ” The BSP cut its 2026 inflation forecast to 6.1 percent from 6.4 percent, but that for 2027 was raised to 5.4 percent from 4.5 percent.

Central bank Assistant Governor Rogelio Mercado Jr. said the 2026 forecast was trimmed after lower-than-expected results in June and July and declining oil prices. Get the latest news delivered to your inbox Sign up for The Manila Times newsletters By signing up with an email address, I acknowledge that I have read and agree to the Terms of Service and Privacy Policy.

This will be partly offset by the impact of El Niño on rice prices in the fourth quarter, he added. Remolona said inflation was expected to peak around the fourth quarter of this year before easing and returning to the 2.0- to 4.0-percent target range around the fourth quarter of 2027. Advertisement For 2028, the BSP sees inflation returning to around 3.3 percent.

Remolona said the Monetary Board had considered the possibility of holding rates before deciding to deliver the 25-basis-point increase.

“We considered all possibilities,” he said. “But the decision to hike by 25 wasn’t so hard. ” Asked what would prompt the Monetary Board to pause, Remolona said this would be when the central bank became confident that inflation is moving toward the 3.0-percent target. Advertisement “We will tighten as much as we need to,” he said.

Lower-than-expected second-quarter economic growth had raised speculation that the BSP would pause, but the central bank chief said that the government was working to address infrastructure spending issues that had been blamed for the slowdown.

“The fundamentals for growth are still in place,” Remolona said, with growth likely to rebound in the fourth quarter and more or less fully recover by next year. He said the policy rate was not holding back growth, noting that monetary authorities consider both inflation and the output gap in their policy decisions.

Advertisement The BSP said the measured increases in the policy rate — Thursday’s hike was the third for 2026 — would continue to anchor inflation expectations among consumers and businesses and mitigate the further broadening of inflationary pressures. Remolona said the central bank was looking beyond oil prices, which have remained volatile, as other inflationary factors have become more prominent.

“The oil is not over yet. It’s still volatile. But the other risks are bigger,” he said. The Monetary Board said it was prepared to take further policy action to ensure inflation returns to 3.0 percent in keeping with its price stability mandate.

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Monetary Authorities Interest Rates Bangko Sentral Ng Pilipinas BSP Inflation El Niño Minimum Wage Hikes Benchmark Rate Overnight Deposit Lending Facilities Preemptive Move BSP Governor Eli Remolona Inflation Forecast Oil Prices Rice Prices Monetary Board Inflation Target Economic Growth Policy Rate Infrastructure Spending Policy Decisions Anchor Inflation Expectations Consumers Businesses Oil Prices Price Stability Mandate

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