The Bangko Sentral ng Pilipinas raised its benchmark interest rate for a third straight meeting as persistent price pressures and risks from volatile oil prices, El Niño and potential wage increases cloud the inflation outlook.
The Monetary Board lifted the target reverse repurchase rate by 25 basis points to 5% on Thursday, bringing cumulative tightening since April to 75 basis points. Rates on the overnight deposit and lending facilities were raised to 4.5% and 5.5%, respectively.
The move extends the central bank’s tightening cycle even as headline inflation has begun to ease and economic growth weakened in the first half of the year.
“Headline inflation has eased, although oil prices remain volatile,” the BSP said. Severe El Niño conditions could push agricultural prices higher, while possible wage adjustments risk generating second-round effects, it added.
“These underlying price risks require preemptive monetary action,” the central bank said.
Average inflation is still projected to exceed the government’s 2%-4% target range in both 2026 and 2027. The BSP said its latest core inflation estimates also point to broadening price pressures beyond volatile food and energy items.
Inflation is expected to moderate gradually and settle near the 3% midpoint of the target range by 2028.
The BSP said measured rate increases should help anchor inflation expectations and limit the risk that temporary supply shocks spill over into wages and other prices.
The central bank acknowledged weaker economic growth in the first half but said the country’s medium-term fundamentals remained intact. It expects activity to strengthen in the second half as government measures help revive public spending and investment.
Policymakers kept the door open to further tightening, saying they were prepared to take additional action as warranted to steer inflation back toward the 3% target.
