The Bangko Sentral ng Pilipinas (BSP) has raised its key policy interest rate by 50 basis points to 5.50% as it moves to curb mounting inflationary pressures and address risks to the country's price stability.
In a press release on Thursday, October 22, the BSP said the Monetary Board also adjusted the overnight deposit and lending facility rates to 5.00% and 6.00%, respectively.
“Inflation is seen to accelerate further in the coming months,” the central bank said, warning that average headline inflation is expected to remain elevated in 2027 before approaching its 3.0% target in 2028.
The BSP added that core inflation, which excludes certain volatile price items, is also projected to continue rising, signaling persistent underlying price pressures.
Among the factors driving inflation risks are renewed tensions in the Middle East, which have pushed global oil prices higher, as well as recent increases in transportation fares. The central bank also cited El Niño conditions as a continuing threat to agricultural production and food prices.
Despite these pressures, the BSP expects domestic economic activity to recover, supported by fiscal measures.
The Monetary Board said it recognized the need for a strong response to expanding price pressures and additional risks that could push inflation higher.
“Such a decisive response will make monetary policy appropriately restrictive. This will contain second-round effects and firmly anchor inflation expectations,” the BSP said.
The policy rate serves as a key benchmark for interest rates across the financial system, influencing borrowing costs for households and businesses, including loans and other financial services.
The central bank also reaffirmed its readiness to take further action if necessary to bring inflation back to its target.
“The BSP stands ready to take further monetary policy action as necessary to ensure the timely return of inflation to the target, in keeping with our price stability mandate,” it said.
