To fight inflation, BSP raises key rate for first time in 2 years
MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) raised its benchmark interest rate by 25 basis points on Thursday, April 23.
It marked its first policy tightening in over two years as inflation pressures intensified due to conflict in the Middle East.
The move by the central bank’s Monetary Board brought the key policy rate, which influences lending costs across the banking system, to 4.5 percent.
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‘Worsened outlook’
In a statement, the BSP said the inflation outlook had worsened, citing the impact of geopolitical tensions on global commodity prices.
Rising costs of oil and fertilizers have started to pass through to domestic fuel and food prices, while core inflation has continued to climb, signaling broader underlying price pressures.
The rate hike was largely anticipated, with a majority of economists in a recent Inquirer poll expecting the central bank to begin its tightening cycle.
By increasing borrowing costs, the BSP aims to temper consumer spending and curb demand-driven inflation, though such measures may also slow overall economic growth.
Inflation
Still, the Philippines, among the first countries to declare a national energy emergency amid the Middle East crisis, faces inflation largely driven by supply-side factors after disruptions to global oil exports.
The central bank has previously acknowledged that monetary policy tools are less effective against supply shocks and could risk delaying the country’s economic recovery, particularly in the wake of recent domestic challenges.
Even so, analysts note that the rate increase could help anchor inflation expectations and reinforce the BSP’s commitment to price stability.
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