FX.co ★ Philippine Central Bank Delivers Expected Rate Hikes

The Bangko Sentral ng Pilipinas (BSP) raised its benchmark interest rate by 25 basis points to 5.0% at its August 2026 policy meeting, in line with market expectations. This marks the third consecutive rate hike as the central bank continues its efforts to curb persistent inflationary pressures.

Headline inflation eased to 6.2% in July from 6.4% in June, while core inflation slowed to 4.2% from 4.4%. Despite this moderation, the BSP flagged several upside risks that warrant close monitoring, including volatile global oil prices, the impact of a severe El Niño episode on agricultural production and costs, and the possibility of further wage adjustments.

The BSP still expects average headline inflation to remain above the 4.0% upper end of its target band in 2026 and 2027, before gradually converging toward the 3.0% midpoint of the target range by 2028.

On the growth front, underlying fundamentals are assessed to be intact despite a weak outturn in the first half of the year. Fiscal support is projected to help underpin economic activity in the second half of 2026.

In tandem with the policy rate adjustment, the BSP also raised the overnight deposit facility rate to 4.5% and the overnight lending facility rate to 5.5%.