Bangko Sentral ng Pilipinas leaves door open for further rate hikes amid inflation risks
Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr. said on Monday the central bank can raise its benchmark interest rate again if needed, even as inflation is now expected to stay above target until 2028.
Source: BusinessWorld Philippines · August 17, 2026 at 7:52 PM · AI-assisted report
Single-sourceMANILA, 18 AUGUST 2026 —
Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr. said on Monday the central bank can raise its benchmark interest rate again if needed, even as inflation is now expected to stay above target until 2028.
Market Impact
Speaking at the House of Representatives during an economic managers’ briefing on the 2027 National Expenditure Program, Mr. Remolona said inflation would ease gradually but warned that risks remain tilted to the upside. The BSP now forecasts headline inflation at 6.4% this year, down from its April estimate of 6%, before moderating to 4.5% in 2027 and 3.1% in 2028.
BSP Deputy Governor Zeno Ronald R. Abenoja flagged upside risks from higher global oil prices and rising inflation expectations. He noted that private sector forecasts also point to elevated inflation in the near term, though they expect it to revert toward the 3% target by 2028 or 2029. Core inflation—stripping out volatile food and energy prices—cooled to 4.2% in July from 4.4% in June, but Mr. Abenoja said broadening price pressures have worsened the outlook.
The central bank has raised its key policy rate by 50 basis points this year, bringing it to 4.75% in June, as it seeks to anchor expectations and slow price pressures. Mr. Remolona said the moves were calibrated to contain inflation while acknowledging temporary weakness in growth.
Inflation has stayed above the BSP’s 3% goal for five consecutive months. July’s reading eased to 6.2% from June’s 6.4%, but year-to-date inflation still averages 5%. Mr. Remolona attributed sticky inflation to the continued pass-through of global supply shocks, noting that oil price spikes affect both energy and fertiliser-driven food production.
The BSP’s tightening has come despite a sharp slowdown in economic growth. Gross domestic product expanded just 2.3% in the second quarter, the weakest performance outside the pandemic since the fourth quarter of 2009.
Mr. Remolona said the weaker-than-expected growth allows room for a less aggressive policy stance, but the inflation fight remains unfinished.
“Last week, we said that given these numbers, we can now be less aggressive,” he said. “But the fight against inflation is still ongoing.”
Mr. Abenoja added that stubborn core inflation has worsened the outlook for 2025 and 2026.
The Monetary Board will hold its next policy review on Aug. 27, with further meetings scheduled for Oct. 22 and Dec. 17.
For Malaysian businesses, the BSP’s stance reinforces the risk of prolonged tight monetary conditions across the region.
Related: Bangko Sentral