BSP Holds Rate at 4.25% Despite Inflation Risks

MANILA, Philippines - The Bangko Sentral ng Pilipinas held an unscheduled off-cycle meeting on March 26 and decided to keep its benchmark reverse repurchase rate unchanged at 4.25 percent, opting against tightening amid escalating inflation risks driven by the Middle East conflict and supply-side pressures.

The central bank's Monetary Board, which was not set to review rates until April 23, convened early to address uncertainties from the ongoing regional tensions, particularly disruptions in the Strait of Hormuz that threaten global oil supplies. The Philippines, as a net oil importer, faces heightened vulnerability to energy price spikes, which have contributed to recent inflation accelerations. Officials characterized the upside risks as primarily supply-driven, noting that monetary policy tools like rate hikes would have limited effectiveness against such shocks while potentially hindering the economy's recovery from subdued growth.

BSP Governor Eli Remolona Jr. explained the rationale during a post-meeting briefing, stating, "Normally, with inflation going where it's going, we would have hiked. But because it was driven by supply shocks, we felt a hike wouldn't do very...