FX.co ★ Philippine Central Bank Hikes Rates as Expected

The Bangko Sentral ng Pilipinas raised its benchmark interest rate by 25 basis points to 4.75% at its May 2026 policy meeting, in line with market expectations. This marks a second consecutive rate hike as the central bank moves to contain persistent inflationary pressures.

The Monetary Board noted that inflation risks remain elevated, driven by sustained high global oil and fertilizer prices that continue to feed into domestic fuel and food costs amid ongoing tensions in the Middle East. The BSP projects that average headline inflation will exceed its 4.0% target ceiling in both 2026 and 2027, before easing slightly but still remaining above the 3.0% midpoint target in 2028.

Annual inflation slowed to 6.8% in May 2026 from a three-year high of 7.2% in April, but it remains above the central bank’s 2%–4% target band, with the Philippines particularly vulnerable due to its heavy reliance on imported energy from the Middle East. The overnight deposit and lending facility rates were also raised, to 4.25% and 5.25%, respectively.