BSP keeps policy rate at 4.25%

The Bangko Sentral ng Pilipinas (BSP) kept its policy rate at 4.25 percent following an off-cycle Monetary Board meeting on Thursday to assess the impact of the Middle East conflict on inflation and growth.

BSP Governor and Monetary Board Chairperson Eli Remolona Jr. said the rare meeting was called due to the “fast-changing and uncertain environment” caused by the ongoing conflict.

Global oil and fertilizer price surges have driven domestic fuel costs and transport fares higher, pushing inflation projections above the 4-percent ceiling in 2026, before easing back within target by 2027. BSP Deputy Governor Zeno Abenoja noted inflation could average 5.1 percent this year, up from the earlier 3.6 percent forecast, and 3.8 percent in 2027 from 3.2 percent.

“Previously, we were looking at around USD64 to USD65 per barrel. Now, we have updated them… the average international oil prices could hover at around USD85 on average for this year, and next year, about USD76 per barrel,” Abenoja said.

Remolona explained that inflation is largely driven by supply shocks, limiting the effectiveness of monetary policy. “To raise rates at this time would be painful,” he said, noting economic growth is forecast at 4.4 percent this year and 5.9 percent in 2027.

The BSP also plans to consider regulatory relief measures similar to those implemented during the Covid-19 pandemic to support borrowers, including standardized loan restructuring and postponed payments for certain sectors.

“I hope it reassures markets that we are assessing the situation constantly… Because growth was relatively weak, growth would temper any rise in inflation,” Remolona said, emphasizing continued vigilance against second-round effects of the supply-driven inflation.