BSP raises rates for third straight meeting

The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) on Thursday decided to raise rates for the third straight meeting, warning that although headline inflation has eased, oil prices remain volatile and the severe El Niño could bring consumer prices even higher.

The decision effectively raised the target reverse repurchase rate to 5.0%, the overnight deposit rate to 4.5%, and the overnight lending rate to 5.5%.

According to the central bank, inflation has eased even as oil prices remain volatile. Consumer prices grew by 6.2% in July, slower than 6.4% in June, but still above the target range of 2.0% to 4.0%.

The BSP now expects inflation to average 6.1% this year, down from the 6.4% projection it made in June, due to the lower-than-expected inflation print in June and July and the decline in oil prices.

The central bank also revised its inflation outlook for 2027 to 5.4%, up from 4.5% in June, as it said the impact of El Niño will be more pronounced in the fourth quarter.

“Today’s rate hike was a preemptive move because of risks that we anticipate, including the risk of an El Niño event on food prices and the risk of further minimum wage increases,” BSP Governor Eli Remolona Jr. said at a briefing.

The central bank also cited potential wage adjustments as warranting close monitoring, including their implications for broader price setting and second-round effects, saying these risks “require preemptive monetary action.”

“The measured increases in the policy rate will continue to anchor inflation expectations and mitigate the risk of further second-round effects,” the BSP said in a statement.

“Despite slow growth in the first half of 2026, the fundamentals for growth appear to be intact over the medium term. With the support of fiscal measures, growth is expected to strengthen in the second half of the year,” it added.

The BSP also hiked its inflation forecast for 2028 to 3.3% from 3.1%. — RSJ, GMA News