Philippines central bank raises interest rate to 5.5% as inflation hits 7.2%
The Bangko Sentral ng Pilipinas surprised markets with a 50-basis-point hike, its fourth in a row, as oil prices, a record-low peso and El Niño push inflation higher.
At a glance
- The Bangko Sentral ng Pilipinas (BSP) raised its key rate by 50 basis points to 5.5% on Thursday, October 22, 2026 — its fourth straight hike.
- All 27 economists in one poll had expected a smaller 25-basis-point move.
- Inflation reached 7.2% in September, the fastest since March 2023, driven by oil prices, transport fares and food.
- The BSP raised its 2027 inflation forecast to 6.0% from 5.4%; Governor Eli Remolona warned inflation could touch 8% next year.
- The peso has lost nearly 10% since the Iran war began and hit a record low of about 62.4 per dollar.
The Philippines' central bank, the Bangko Sentral ng Pilipinas (BSP), raised its benchmark interest rate by 50 basis points to 5.5% on Thursday, October 22, 2026, a bigger move than markets expected, as inflation climbed to 7.2%. It was the bank's fourth increase in a row, and Governor Eli Remolona said more hikes are possible because prices are expected to rise further.
The decision in numbers
| Rate | New level |
|---|---|
| Overnight reverse repurchase (key rate) | 5.50% |
| Overnight deposit facility | 5.00% |
| Overnight lending facility | 6.00% |
| Change | +0.50 percentage point |
All 27 economists in one poll had expected only a 25-basis-point rise. Remolona said a "strong majority" of the Monetary Board voted for the larger move.
Inflation forecasts
| Year | BSP forecast (average) | Previous forecast |
|---|---|---|
| 2026 | 6.1% | 6.1% |
| 2027 | 6.0% | 5.4% |
| 2028 | 3.3% | 3.3% |
The BSP's target range is 2% to 4%. It expects inflation to come back near its 3% midpoint only in 2028.
Background: oil, the peso and El Niño
Philippine inflation slowed for four months in a row before jumping to 7.2% in September, matching April's level and the fastest pace since March 2023. Core inflation, which strips out food and fuel, rose to a three-year high.
The main drivers are higher global oil prices linked to the war involving Iran and attacks on Gulf shipping, recent increases in transport fares, and a weak currency. The peso has lost nearly 10% against the US dollar since the war began and has touched a record low of about 62.4 per dollar, making imported fuel and food more expensive.
The weather agency PAGASA expects a strong El Niño to bring less rain from October and possibly to last until early or mid-2027. Around 40 provinces could face reduced rainfall or drought, rising to about 80 by January, which would hit rice and vegetable harvests.
What the central bank said
"We took this decisive option because we forecast that inflation will accelerate further in the coming months," Remolona said. He warned that inflation could reach 8% at some point in 2027, and as high as 9% for the poorest 30% of households, who spend more of their income on food and transport.
The BSP said it "stands ready to take further monetary policy action as necessary". Remolona added that policymakers still had room to adjust as government spending helps the economy recover.
The peso rallied briefly after the announcement but then slipped back towards its record low. Some economists said the move could mark the end of the tightening cycle if energy prices settle, and one bank expects the BSP to hold rates in December.
Why it matters
Higher rates make loans for homes, cars and businesses more expensive in the Philippines, where growth was already weak in the first half of 2026. But the central bank judged that letting inflation run higher would hurt families more, especially poorer households.
The decision is part of a wider pattern in Asia: oil-importing countries such as the Philippines, Pakistan and India are facing pressure on their currencies and prices from the Middle East conflict. Millions of Filipino workers in the Gulf also send money home, so the region's turmoil affects the economy in more than one way.
What happens next
The BSP's Monetary Board holds its last policy meeting of the year on December 17, 2026. Before then, October inflation data, due in early November, will show whether price pressures are still building. Markets will also watch oil prices and the peso, which together will decide whether the bank needs to raise rates a fifth time.
Questions people are asking
What is the Philippines' interest rate now?
After the October 22, 2026 decision, the BSP's key overnight reverse repurchase rate is 5.5%, with the overnight deposit rate at 5.0% and the overnight lending rate at 6.0%.
Why did the Bangko Sentral raise rates by 50 basis points?
The BSP said it expects inflation, already 7.2% in September, to rise further because of high oil prices, recent transport fare increases and the expected effect of El Niño on food production.
When is the next BSP rate decision?
The Monetary Board's next and last policy meeting of 2026 is on December 17.
