Philippine central bank raises interest rate to 5.50% in larger-than-expected move
Bangko Sentral ng Pilipinas raised its benchmark rate by half a percentage point as inflation climbed to 7.2%. Economists polled by Reuters had expected a smaller increase.
Bangko Sentral ng Pilipinas raised its benchmark interest rate by 50 basis points to 5.50% in the Philippines on October 22, making borrowing more costly as inflation remained well above its target. Governor Eli Remolona Jr. announced the Monetary Board鈥檚 decision, its fourth consecutive rate increase this year, according to Rappler and Reuters.
The increase was twice the size expected by all 27 economists in a Reuters poll. The central bank said the decision would make monetary policy appropriately restrictive and that it was ready to take further action when necessary. Its next scheduled policy meeting is December 17.
Inflation and the peso behind the rate decision
Annual inflation rose to 7.2% in September from 6.1% in August, above the central bank鈥檚 2% to 4% target. Reuters attributed the increase to higher prices for rice, electricity, fuel and transport. Rappler reported that core inflation, which excludes selected volatile food and energy items, reached 4.7%, its highest level in three years.
The peso had closed at a record-low 63.361 per US dollar before the decision, according to Rappler. Reuters reported that it strengthened to 63.311 per dollar after the increase. The exchange-rate figures describe different points in time; the later rate does not establish how long the currency鈥檚 gain lasted.
Higher rates meet slower growth
The central bank is tightening policy while economic growth is weak. The Philippine economy grew 2.3% from a year earlier in the second quarter, its slowest pace since 2021, Reuters reported, citing a construction slump and softer domestic demand. Higher interest rates can restrain borrowing and spending, adding pressure to an economy that had already slowed.
Before the October decision, the central bank had projected average inflation of 6.1% in 2026 and 5.4% in 2027, Rappler reported. Both forecasts exceeded its target range. Rappler also identified disruptions to food production from bad weather, higher global oil prices and the threat of El Ni帽o as pressures that interest rates cannot directly address.
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Sources and context
- Bangko Sentral raises interest rates to 5.50% as inflation, peso woes mountRappler
- Philippine central bank raises key interest rate by 50 basis pointsReuters, republished by Channel NewsAsia
AI-assisted article checked against the listed sources. NewsJaws did not conduct interviews or attend the reported events.