The Bangko Sentral ng Pilipinas (BSP) raised its target reverse repurchase rate by 50 basis points to 5.5% on Thursday, its first half-point hike since February 2023 and the highest level in nearly two years, the central bank said in a statement reported by BusinessWorld. Overnight deposit and lending facility rates also rose by 50 basis points each, to 5% and 6%.

Source: BusinessWorld

The move surprised markets. BusinessWorld said only two of 22 analysts it polled had predicted a 50-basis-point hike, while Dow Jones reported all 11 economists surveyed by The Wall Street Journal had expected a 25-basis-point rise. It was the BSP's fourth straight tightening meeting, taking total hikes since April to 125 basis points.

Source: Dow Jones via Morningstar

Headline inflation reached 7.2% in September, the seventh straight month above the BSP's target, while core inflation rose to 4.7%, a nearly three-year high, according to the reports. The peso had closed at a record low of 63.361 per dollar on October 21, BusinessWorld reported.

BSP Governor Eli M. Remolona Jr. said, according to BusinessWorld: 'This decisive adjustment will appropriately tighten monetary conditions in order to contain spillover effects and firmly anchor inflation expectations.' The BSP said it 'stands ready to take further monetary policy action as necessary' and warned inflation could accelerate further, driven by higher oil prices from renewed Middle East tensions, transport costs and El Niño risks to farm output.

Dow Jones reported the BSP expects inflation to stay high in 2027 and approach its 3% target in 2028. The central bank said domestic activity is expected to recover with support from fiscal measures, giving it room for the tightening.

5.5%new policy rate
50 bpshike on Thursday
7.2%September inflation

What is solid

  • The BSP raised its key rate by 50 basis points to 5.5% on Thursday, its fourth straight tightening, according to the BSP statement reported by BusinessWorld and Dow Jones.
  • September headline inflation was 7.2% and core inflation was 4.7%, according to the reports.

What is only claimed

  • Economists differ on whether another hike will follow at the BSP's December 17 meeting; one bank economist cited by Rappler via local coverage expects a further 25-basis-point rise, which is a forecast, not a decision.