Philippine Central Bank Raises Key Rate to 4.5%

The Bangko Sentral ng Pilipinas raised its benchmark rate by 25 basis points to 4.5% at its April 2026 meeting, its first tightening move in more than two years. The Monetary Board cited a worsening inflation outlook, driven by rising global oil and fertilizer prices amid the ongoing Middle East conflict, which have begun feeding into domestic fuel and food costs. Core inflation also continued to rise, signaling broader underlying price pressures. The BSP now projects inflation to exceed the 4.0% upper bound in both 2026 and 2027, with inflation expectations also increasing, raising risks of de-anchoring. Policymakers said the rate hike was a preemptive move to anchor expectations and contain second-round effects, while supporting economic recovery over the medium term. Looking ahead, the central bank reiterated it will remain data-dependent and stands ready to take further action to bring inflation back to its 3% target.

The Bangko Sentral ng Pilipinas kept its benchmark rate unchanged at 4.25% in an unscheduled meeting on March 23, 2026, pausing after a 25bp cut in February that brought total easing since August 2024 to 225bps. Policymakers signaled they are weighing the lagged effects of earlier moves on growth and inflation before adjusting further. “As a data-driven monetary authority, and in light of fast-changing developments and uncertain economic conditions, the Monetary Board met today and decided to maintain the policy rate,” the BSP said. Inflation is projected to breach the 4.0% ceiling this year, likely around 5.1%, as Middle East tensions lift commodity prices, though it may return to target by 2027. Risks remain largely supply-driven and less responsive to monetary policy. The annual inflation rose to 2.4% in February, a 13-month high and the third consecutive monthly acceleration. The BSP also flagged weak growth in 2026, warning that raising rates now “would delay the recovery".

The Central Bank of the Philippines reduced its benchmark interest rate by 25 bps to 4.25% during its February 2026 meeting, bringing total easing since August 2024 to 225 bps. The move, widely expected, comes as manageable inflation allowed policymakers to support an economy weakened by softer domestic demand and fallout from a major corruption scandal tied to infrastructure spending. Economic growth slowed to about 3% last quarter, among the weakest in Southeast Asia, as confidence deteriorated. While the inflation outlook remains contained, forecasts for 2026 were revised slightly higher due mainly to temporary supply-side pressures, with inflation still projected to return close to the 3% target by 2027. The central bank said activity could recover in the second half of the year if confidence improves, stressing that future policy decisions will remain data-dependent. Overnight deposit and lending rates were adjusted to 3.75% and 4.75%, respectively.