BSP considering off-cycle rate hike

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) may raise borrowing costs for a second consecutive time ahead of its scheduled policy meeting on June 18, as inflation risks mount because of the ongoing Middle East conflict.

In an exclusive interview on Money Talks on One News, BSP Governor Eli Remolona Jr. said the Monetary Board is considering rate increase which could be an off-cycle move.

“I wouldn’t say likely (but) we’re considering it (off-cycle hike).”

However, Remolona noted that they may also wait until the release of the May inflation data, which comes out on June 5, before delivering the next move.

“That’s very close to the next scheduled policy meeting. So, at this point, it’s a toss-up whether we do an off-cycle or we just wait for the regular meeting, which is not that far away anyway,” he said.

The BSP convened a surprise off-cycle meeting in March but left policy rates unchanged. It later raised its benchmark rate by 25 basis points in April to bring the key policy rate to 4.5 percent.

The central bank chief has noted the risk of stagflation amid slowing growth and faster inflation, but emphasized that fiscal policy should prioritize reviving growth for recovery, while monetary policy remains focused on inflation under control.

“Ordinarily, a supply shock, you would look through it because it would go away and then you’re back to where you are. But now this is a big supply shock and it’s a persistent supply shock,” he said.

Remolona added, “So we have to react, and we have to react aggressively, I think, in this kind of situation. That’s why we raised rates early.”

Inflation surged to 7.2 percent in April, its highest in more than three years, driven by faster increases in food and transport costs amid US-Israel attacks on Iran disrupting fuel supply.

Asked if they are now behind the curve, the BSP top official said: “There’s a risk that we are. It depends on whether the supply shock persists.”

Remolona also said the impact of the supply shock on other items in the consumer price index was unexpected, noting it has already pushed up the cost of fertilizer and rice.

“I think whatever we do, we want to convey the message that we’re trying to be proactive.  We’re trying to stay ahead of the curve and that we’re serious about inflation,” he said.

The BSP has lowered its full-year 2026 inflation forecast to 6.3 percent and projected a 4.3 percent print in 2027.

On the peso, Remolona said that the central bank worries about the peso if it worsens inflation, but is not trying to keep the currency at a certain level.

“We worry about it to the extent that it worsens inflation. At the same time, a peso that’s weaker helps our exports. Our exports do need help because we’re facing a current account deficit,” he said.