BSP keeps rate at 4.25 percent amid inflation risks

The Bangko Sentral ng Pilipinas’ Monetary Board kept its key policy rate at 4.25 percent, saying it is weighing rising inflation risks against a weak growth outlook and sees little reason to tighten policy while near-term price pressures remain largely supply-driven.

The board said the ongoing conflict in the Middle East has pushed global oil and fertilizer prices sharply higher, adding pressure to the domestic economy through higher fuel prices and transport fares.

The BSP’s latest projections show inflation in 2026 breaching the 4.0-percent ceiling before moving back toward the tolerance range by 2027.

The central bank said inflation expectations remain well-anchored, even as the outlook has become more uncertain.

Over the near term, the Monetary Board said upside risks to inflation are mostly supply-driven, an area where monetary policy has limited effectiveness.

The BSP also said economic growth in 2026 is expected to remain weak, warning that a rate hike at this point would delay the recovery.

Looking ahead, the central bank said it will stay vigilant against possible second-round effects, or the risk that higher fuel and transport costs could spread more broadly through the economy and lift prices further.

The Monetary Board said it stands ready to act as needed in line with the BSP’s primary mandate of maintaining price stability.

The BSP conducts monetary policy under an inflation-targeting framework that sets a 3.0 percent goal with a tolerance band of plus or minus 1.0 percentage point for 2025–2028, and the central bank describes price stability as its primary mandate.