BSP hikes rate to 4.75 percent

In an attempt to stave off the runaway inflation, the Bangko Sentral ng Pilipinas (BSP) has decided to increase the policy rate which guides lending costs of banks to 4.75 percent.

This is the BSP’s second rate hike this year.

Many economists have correctly  predicted the quarter-point hike.

“Inflationary pressures remain strong. Global oil and fertilizer prices remain elevated and continue to drive domestic fuel and food prices. Rising core inflation indicates broadening price pressures and second-round effects, including higher inflation expectations,” the BSP said in a statement.

Policymakers also raised their inflation forecasts, with 2026 inflation now expected to average 6.4 percent from the previous forecast of 6.3 percent.

For 2027, the forecast was raised to 4.5 percent from 4.3 percent.

The BSP likewise provided its inflation projection for 2028 for the first time, with inflation seen averaging 3.1 percent, comfortably within the central bank’s target range.

This indicates that it will take at least two years for average inflation to move back within the tolerance range of 2 to 4 percent.