BSP raises key rate to 4.75%

The Bangko Sentral ng Pilipinas raised its key policy rate by 25 basis points to 4.75 percent on June 18, 2026, as inflation pressures remained strong and the central bank projected inflation to stay above target in the coming years.

The Monetary Board adjusted the interest rate on the overnight deposit facility to 4.25 percent.

It also raised the overnight lending facility rate to 5.25 percent.

The decision was announced in a press release of BSP Gov. Eli M. Remolona Jr., identified as File/Ref. No. MPRG-052926-01 and MPSS Form No. 08-007, Version 0, updated Jan. 31, 2024.

The BSP said inflationary pressures remain strong as global oil and fertilizer prices stay elevated.

The central bank said those external cost pressures continue to drive domestic fuel and food prices.

It also cited rising core inflation as a sign that price pressures are broadening across the economy.

The BSP said the trend points to second-round effects, including higher inflation expectations.

Latest BSP projections showed a higher inflation path.

The central bank said average headline inflation is expected to breach the 4.0 percent tolerance ceiling in both 2026 and 2027.

For 2028, inflation is projected to settle slightly above the 3.0 percent target.

The policy tightening reflects the BSP’s inflation-targeting mandate, under which interest rate adjustments are used to influence borrowing costs, demand, and price expectations.

Higher policy rates typically make credit more expensive for households and businesses.

They can also help temper demand and reduce the risk that temporary price shocks become embedded in wages, contracts, and consumer expectations.

The BSP said the rate increase would help keep inflation expectations anchored.

It said the move would also mitigate the risk of second-round effects.

The central bank said the measured monetary policy action would complement fiscal measures in supporting steady consumption and strengthening business sentiment.

The Monetary Board said it would continue to be guided by incoming data.

It also said it was prepared to take further monetary action as needed to ensure that inflation returns to the 3.0 percent target.