As inflation risks persist
MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is not yet considering interest rate cuts as monetary tightening remains necessary to contain inflation, which could continue rising over the next few months.
Speaking to reporters on the sidelines of an event hosted by the European Chamber of Commerce of the Philippines, BSP Governor Eli Remolona Jr. said the central bank was not yet considering a shift toward monetary easing as price pressures remain elevated.
“Easing? Not yet. We’re still in a tightening cycle, so we don’t know,” Remolona said when asked when the next easing cycle could begin.
He also declined to say whether monetary tightening would extend into 2027, emphasizing that future policy decisions would depend on incoming economic data.
The remarks came after the Monetary Board raised its benchmark interest rate by 50 basis points to 5.50 percent on Oct. 22, its fourth consecutive rate hike this year, as authorities moved to contain inflation and prevent further increases in consumer prices.
The BSP has so far raised key policy rates by 125 basis points since it resumed its tightening cycle in April to contain rising inflation.
The benchmark rate influences borrowing costs across the economy. Higher rates are intended to curb spending and demand, helping slow inflation, although they can also weigh on investment and economic growth.
BSP Deputy Governor Zeno Ronald Abenoja, for his part, said inflation could remain elevated in the coming months, with the possibility of breaching eight percent as higher food and energy prices continue to exert pressure on consumer prices.
“There’s a chance. We’re looking at those possibilities,” Abenoja said when asked whether inflation could exceed eight percent.
The central bank earlier projected October inflation to settle between 7.1 and 8.1 percent from 7.2 percent in September.
Abenoja said inflationary pressures could persist toward the end of the year and into the first few months of 2027 before gradually easing.
Meanwhile, Remolona said the pace of economic recovery would also influence the BSP’s future monetary policy decisions.
The Philippine economy grew by just 2.3 percent in the second quarter, slower than the 2.8-percent expansion recorded in the first three months.
Remolona said economic activity was already recovering, with the government seeking to accelerate spending to support growth in the fourth quarter and early 2027.
“The third quarter is already over, so our expectation is that there will be a rebound in the fourth quarter or the first quarter of next year. The government is trying very hard to accelerate spending,” he said.
Abenoja likewise expressed optimism that the economy would continue recovering through next year, supported by higher public expenditures.
“For growth, we think it will continue to recover this year up to next year. It is important that we continue to see fiscal spending increase,” Abenoja said.
Asked whether the BSP could make an off-cycle policy adjustment before its next scheduled Monetary Board meeting on Dec. 17, Remolona said the decision would depend on incoming economic indicators.
“It depends. We’re still waiting for a lot of data,” he said.
On the foreign exchange market, Remolona reiterated that excessive peso depreciation remains a concern because a weaker currency could increase the cost of imported goods and fuel further inflation.
“When the depreciation is too sharp, we don’t like it. It has a significant impact on inflation. We have a way of assessing what constitutes excessive depreciation,” he said.
Asked how actively the BSP was intervening in the foreign exchange market, Remolona said, “We go in and out.”
The peso plunged to an all-time low of 64.17 against the dollar on Oct. 27, before recovering to the 63-per-dollar level in subsequent trading sessions.