BSP ready for more interest rate hikes

To tame inflation

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is prepared to raise interest rates as much as needed to contain inflation, signaling a sustained tightening path following its latest policy hike.

BSP Governor Eli Remolona Jr. said the central bank remains firmly focused on keeping inflation in check, even as it weighs the impact of higher borrowing costs on economic growth.

“We stay vigilant and we’ll do as many hikes as necessary,” Remolona said in an interview with Bloomberg TV, adding that the BSP is “trying to stay ahead of the curve.”

The remarks come a day after the Monetary Board raised its benchmark rate by 25 basis points to 4.5 percent, marking a shift back to tightening as inflation risks intensify due to rising oil and food prices.

Remolona indicated that further rate increases are likely to come in measured steps, depending on how inflation dynamics evolve.

“Normally, it would be a succession of small rate hikes, but it will depend on how big the spillover effects are,” he said.

He noted that while the recent spike in inflation was largely driven by supply-side shocks such as higher oil prices, the central bank is closely monitoring second-round effects.

Despite the tightening bias, Remolona said the BSP remains mindful of the economy’s capacity to absorb higher rates, noting that growth is expected to remain steady. 

The central bank is projecting economic growth of around 4.3 percent this year, with a stronger expansion of as much as six percent in 2027.

On the peso, the BSP chief reiterated that the central bank does not target a specific exchange rate level, even as the currency has weakened past the 60-per-dollar mark in recent weeks.

“We don’t assign special significance to this number 60. It’s not a threshold for us. We basically allow the market to seek its own level,” he said.

Instead, the BSP focuses on limiting excessive volatility, stepping in only when movements become too sharp.

Looking ahead, the BSP chief underscored that policy decisions would remain data-driven, with the central bank ready to act as needed to prevent inflation from becoming entrenched.

“I think the market needs to understand that we will do what’s necessary to contain inflation,” he said.

In a note, BMI Country Risk & Industry Research said the Philippine central bank was noticeably more hawkish and the case for another hike in June rests primarily on the inflation outlook.

BMI raised its average inflation forecast to 4.3 percent this year, with inflation likely to remain above four percent for the rest of 2026. 

“We expect BSP to hike rates by another 25 basis points to 4.75 percent in its next meeting in June. Acting sooner would help to re-anchor inflation expectations before broader price pressures become more entrenched,” BMI said. 

However, two consecutive rate hikes should be enough for now. “Beyond June, we expect the BSP to pause for the rest of the year…given the increasingly fragile growth backdrop,” it said. 

The research firm expects the Philippine economy to grow by around 3.6 percent in the first quarter, way below the government’s five to six percent growth target this year as government outlays remain constrained by the fallout from the corruption scandal.