The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) on Thursday raised its key policy rates by another 25 basis points, citing persistent inflation risks.

The latest adjustment brings the BSP’s target reverse repurchase (RRP) rate to 5 percent.

The interest rates on the overnight deposit and lending facilities were likewise increased to 4.5 percent and 5.5 percent, respectively.

In a briefing at the BSP office in Manila, BSP Governor Eli Remona Jr. said that while headline inflation already eased, core inflation remains above the tolerance range.

Headline inflation eased to 6.2 percent in July from 6.4 percent in June.

Core inflation, which excludes selected food and energy items, settled at 4.2 percent.

Remolona said oil prices also remain volatile.

“Posing further risks to inflation is the possible impact of a severe El Niño event and potential minimum wage adjustments. These underlying price pressures require preemptive monetary action,” he said.

“The measured increases in BSP interest rates will continue to anchor inflation expectations of consumers and businesses, and mitigate further broadening of inflationary pressures.”

The central bank expects inflation to average 6.1 percent for 2026, lower than the previous 6.4 percent projection.

“The 6.1 percent inflation is, of course, driven by lower-than-expected inflation in June and July, as well as declining oil prices. This would be partly offset by the impact of El Niño on rice prices in the fourth quarter,” BSP Assistant Governor Rogelio Mercado Jr. said.

BSP Department of Economic Research Director Lara Romina Ganapin said inflation is expected to peak in the fourth quarter of the year before going back to the tolerance range in the fourth quarter of 2027.

For 2027, the central bank revised its inflation forecast upward to 5.4 percent from the previous 4.5 percent.

This will be driven by the impact of a severe El Niño on rice prices, as well as the impact of a higher minimum wage increase.

For 2028, inflation is projected to settle at 3.3 percent.

Looking ahead, Remolona assured that the Monetary Board is prepared to take monetary policy action as warranted to ensure that inflation returns to the 3 percent target, in keeping with its price stability mandate. (PNA)