The Bangko Sentral ng Pilipinas (BSP) is leaving open the possibility of a larger interest rate increase in August as it assesses inflation risks from a stronger dollar, wage increases, U.S. tariffs and renewed tensions in the Middle East.
BSP Governor Eli Remolona Jr. said there was a chance the Monetary Board could raise interest rates by 50 basis points at its Aug. 27 meeting, although he described the likelihood as small.
“There’s a chance, but it’s a small chance,” Remolona said when asked whether the central bank could adopt a more aggressive tightening stance.
The BSP is incorporating several developments into its inflation forecasts, including recent wage adjustments, tax measures and external shocks.
Remolona said the central bank was still estimating the inflation impact of the latest U.S. tariff measures, with a larger income effect expected in 2027 and a smaller spillover into 2028.
The BSP is also assessing the impact of higher wages on inflation. Remolona said the central bank was not consulted during the wage-setting process, although it could have provided technical advice.
“In principle, we can offer what is called technocratic advice on the side, but we were not consulted,” he said.
The peso’s recent depreciation is also being monitored, though Remolona said the currency’s weakness should be viewed against broad strength in the U.S. dollar.
“The dollar was really, really strong last week,” he said, adding that a weaker peso could raise import costs and contribute to inflation.
Remolona said the BSP intervened only on a limited basis in the foreign exchange market during the recent volatility.
“If we intervene against a strong dollar, we would essentially be supplying dollars to the rest of the world. We can’t fight that kind of move because we would only end up depleting our dollar reserves,” he said.
