The BSP rate hike on October 21, 2026, raised the Philippine central bank’s benchmark by half a percentage point to 5.5%, as policymakers warned that inflation would remain elevated through 2027. Governor Eli Remolona Jr. left further increases open, saying worsening forecasts had added urgency to the decision.
Key Takeaways
- The fourth consecutive increase brought cumulative tightening in 2026 to 1.25 percentage points.
- The BSP raised its 2027 inflation forecast to 6.0% from 5.4%.
- Further hikes remain possible, but economists differ on the path beyond December.
Table of Contents
- BSP rate hike widens the tightening campaign
- Oil, transport and food risks cloud the outlook
- December decision remains open
- Conclusion
BSP rate hike widens the tightening campaign
The half-percentage-point increase was the central bank’s largest since February 2023, when it was also responding to elevated inflation. Alongside the benchmark move, the overnight deposit rate reached 5.0% and the overnight lending rate reached 6.0%.
The BSP’s interest-rate corridor framework places its deposit and lending facilities below and above the overnight reverse repurchase policy rate. These facilities help guide short-term market rates toward the benchmark; they are distinct from the rates banks charge individual borrowers.
“The numbers we were looking at, the forecasts, were worse than we thought,” Remolona said. He described a sense of urgency to dampen inflationary pressures.
| Item | Details |
|---|---|
| 2026 inflation forecast | 6.1%, unchanged. |
| 2027 inflation forecast | 6.0%, raised from 5.4%. |
| 2028 inflation forecast | 3.3%, unchanged. |
Oil, transport and food risks cloud the outlook
Remolona cited higher oil prices, transport fares and the potential effects of El Niño on food prices as reasons inflation could accelerate further. The weather-related food risk remains a possibility rather than a confirmed outcome.
The central bank expects inflation to return to its target range only in 2028. Its latest projections leave the 2026 and 2028 forecasts unchanged while raising the estimate for 2027, pointing to a more persistent inflation problem rather than simply a near-term spike.
Deputy Governor Zeno Abenoja said inflation readings could rise further in the coming months and into early 2027.
December decision remains open
“We remain open to further interest rate hikes,” Remolona said, without committing to the size of another increase. The Monetary Board’s final scheduled meeting of 2026 is December 17.
Pantheon Macroeconomics economist Miguel Chanco said a December increase “isn’t a done deal.” His base case is that the board could begin reversing this year’s hikes by mid-2027, particularly if economic growth remains below par as he expects.
Capital Economics chief emerging market economist Jason Tuvey also expected policymakers eventually to focus more on supporting growth. However, he said persistently high energy prices and additional food-price pressure from El Niño could keep rates elevated for longer, with one or two more increases possible. Those are economists’ assessments, not BSP commitments.
Conclusion
The BSP has accelerated tightening without committing to its next move. The December 17 Monetary Board meeting is the next scheduled decision point, following officials’ warning that inflation could rise further into early 2027.
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