The Philippine central bank raised its benchmark interest rate for a second consecutive meeting on Thursday, citing persistent inflationary pressures despite an interim US-Iran peace deal.
The Bangko Sentral ng Pilipinas (BSP) increased its target reverse repurchase rate by 25 basis points to 4.75%, in line with market expectations.
The central bank said inflationary pressures remain strong, with core inflation pointing to broader price increases and possible second-round effects, including higher inflation expectations.
The BSP said its latest projections show average headline inflation breaching the upper end of its 2%-4% target range in both 2026 and 2027, while inflation is expected to settle slightly above the 3% target in 2028.
“On balance, the Monetary Board decided that monetary policy tightening is warranted,” the bank said, adding that the move would help keep inflation expectations anchored and reduce the risk of second-round effects.
The bank also said it is prepared to take further monetary action as needed to ensure inflation returns to its 3% target.
The move highlights continued caution among Asian central banks even after the US and Iran reached an interim peace deal that includes the reopening of the Strait of Hormuz, a key route for global energy shipments.
The Philippines, which imports nearly all of its oil needs from the Middle East, has been among the economies hit hardest by the war-driven surge in energy costs.
Inflation in the country eased to 6.8% last month but remained well above the central bank’s target range.
The Philippine government has warned that it could take up to a year for domestic fuel prices to return to pre-war levels.
The rate hike also came after the Bank of Japan raised its policy rate earlier this week and signaled further increases to contain inflation risks, while Bank Indonesia is also expected to tighten policy.
Meanwhile, the US Federal Reserve kept interest rates unchanged on Wednesday, although many officials still expect at least one rate hike in 2026, a stance that could support the dollar.
The Philippine peso has recovered from a record low of 61.75 against the dollar earlier this month, but remains down 2.8% since the start of the year.
