The Bangko Sentral ng Pilipinas (BSP) has raised its benchmark interest rate by 25 basis points to counter rising inflation driven by global and domestic price pressures.
Following its latest Monetary Board meeting, the central bank increased the target reverse repurchase (RRP) rate to 4.5 percent. The overnight deposit facility was set at 4.0 percent, while the lending facility rose to 5.0 percent.
The BSP said the move reflects a weaker inflation outlook, citing external shocks such as the ongoing conflict in the Middle East, which has pushed up global oil and fertilizer prices. These increases are beginning to feed into higher domestic fuel and food costs.
“The inflation outlook has deteriorated amid the ongoing conflict in the Middle East. Higher global oil and fertilizer prices have begun feeding through to domestic fuel and food prices. At the same time, core inflation has continued to rise, pointing to a broadening of underlying price pressures,” the BSP said.
The central bank also noted that inflation expectations have continued to rise, increasing the risk that price pressures could become more entrenched and drift away from target levels.
Latest projections show headline inflation breaching the BSP’s 4-percent ceiling in both 2026 and 2027, indicating a more persistent inflation path in the coming years.
The Monetary Board said it opted for preemptive tightening to safeguard price stability and limit spillover effects on broader pricing behavior.
“After considering its options, the Monetary Board deemed it necessary to take timely and preemptive policy action to safeguard price stability. The policy rate increase is intended to anchor inflation expectations and contain second-round effects. A measured increase in the policy rate will still accommodate economic recovery over the medium term,” it said.
The BSP added that future policy decisions will remain data-dependent, with the central bank ready to act as needed.
“Looking ahead, the Monetary Board will continue to be guided by incoming data. The BSP stands ready to take all necessary monetary actions to ensure that inflation returns to the 3.0-percent target, consistent with its primary mandate of maintaining price stability,” it said.