The Bangko Sentral ng Pilipinas (BSP) on Thursday raised its interest rate by 50 basis points to 5.5 percent as inflationary pressures are expected to intensify in the coming months.
The Monetary Board increased the target reverse repurchase (RRP) rate to 5.5 percent. The interest rates on the overnight deposit and lending facilities were also raised to 5 percent and 6 percent, respectively.
“Inflation is seen to accelerate further in the coming months. Average headline inflation is expected to remain high in 2027 and approach our 3.0-percent target in 2028,” the BSP said.
It added that core inflation is likewise projected to continue to rise, indicating underlying price pressures.
The BSP cited renewed tensions in the Middle East that have pushed global oil prices higher, as well as the recent increase in transportation fares, as factors contributing to the inflation outlook.
El Niño conditions also pose risks to agricultural production and food prices, adding to the upside risks to inflation.
“The Monetary Board recognized the need for a strong monetary policy response to broadening price pressures and further upside risks to inflation,” the BSP said.
“Such a decisive response will make monetary policy appropriately restrictive. This will contain second-round effects and firmly anchor inflation expectations,” it also added.
The BSP said it remains ready to implement further monetary policy action as necessary to ensure inflation returns to target on time, in line with its mandate to maintain price stability.