Interest Rates

The Bangko Sentral ng Pilipinas raised its key policy rate by 25 basis points to 4.75% on June 18, citing "strong inflationary pressures" from high global oil and fertilizer prices tied to the Middle East conflict — and raised its 2026 inflation forecast to 6.4% — as the benchmark PSEi slipped to 6,135.35 the next day on expectations of higher yields.

The Philippine Statistics Authority reported on June 5 that headline inflation slowed to 6.8% in May 2026 — lower than the BSP's forecast range of 7.1% to 7.9% and down from April's 7.2% — driven by a sharp deceleration in transport and fuel prices, though the five-month average of 4.5% remains above the government's 2–4% target band and food inflation persists at 5.8%.

Even after headline inflation cooled to 6.8% in May, banks including Deutsche Bank, HSBC, Maybank and Nomura expect the Bangko Sentral ng Pilipinas to keep tightening at its June 18 meeting — because core inflation hit 4.1%, its fastest since December 2023, signaling that the oil-shock price surge is broadening into the rest of the economy.

Philippine inflation slowed to 6.8% in May from a three-year-high 7.2% in April as fuel and food prices eased, the Philippine Statistics Authority reported — but the figure remains well above the government's 2-4% target and sets up a tense June 18 policy meeting for the Bangko Sentral ng Pilipinas.

BSP Governor Eli Remolona said on May 22 that the Monetary Board is "considering" a second straight rate hike before its scheduled June 18 meeting, as April inflation surged to a three-year high of 7.2% — well above target. The same day, the Asian Development Bank signaled it will likely cut the Philippines' already-reduced growth forecast when it next publishes projections in July.

BSP cuts its benchmark rate to 4.25%, a three-year low, marking its sixth straight reduction. The flood control corruption scandal continues to suppress consumer and investor confidence in the Philippine economy.