Manila: The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) on Thursday raised its key policy rates by another 25 basis points, citing persistent inflation risks. The latest adjustment brings the BSP's target reverse repurchase (RRP) rate to 5 percent. The interest rates on the overnight deposit and lending facilities were likewise increased to 4.5 percent and 5.5 percent, respectively.

According to Philippines News Agency, BSP Governor Eli Remona Jr. highlighted that while headline inflation has eased, core inflation remains above the tolerance range. Headline inflation eased to 6.2 percent in July from 6.4 percent in June, whereas core inflation, which excludes selected food and energy items, settled at 4.2 percent. Remolona pointed out that oil prices remain volatile, posing further risks to inflation. He noted the potential impacts of a severe El Ni±o event and possible minimum wage adjustments as underlying price pressures necessitating preemptive monetary action.

The central bank expects inflation to average 6.1 percent for 2026, a decrease from the previous 6.4 percent projection, driven by lower-than-expected inflation in June and July and declining oil prices. However, this could be partly offset by the impact of El Ni±o on rice prices in the fourth quarter, as stated by BSP Assistant Governor Rogelio Mercado Jr.

BSP Department of Economic Research Director Lara Romina Ganapin mentioned that inflation is expected to peak in the fourth quarter of the year before returning to the tolerance range in the fourth quarter of 2027. For 2027, the central bank revised its inflation forecast upward to 5.4 percent from the previous 4.5 percent due to the potential impact of El Ni±o on rice prices and a higher minimum wage increase. By 2028, inflation is projected to settle at 3.3 percent.

Looking ahead, Remolona assured that the Monetary Board is prepared to take necessary monetary policy actions to ensure that inflation returns to the 3 percent target, in alignment with its price stability mandate.