BSP Raises Rate to 4.5% on Inflation Pressures

The Bangko Sentral ng Pilipinas raised its benchmark interest rate by 25 basis points to 4.5 percent on April 23, marking the central bank's first policy tightening move in more than two years and signaling the start of a new cycle aimed at curbing resurgent inflation driven by the ongoing Middle East conflict.

The decision by the BSP's Monetary Board came as headline consumer price inflation accelerated to 4.1 percent year on year in March, exceeding the bank's 2 to 4 percent target range for the first time since late 2023. Officials attributed the surge primarily to higher global oil and fertilizer prices stemming from the war involving Iran, which has disrupted energy supplies and fed into domestic fuel, food, and transport costs. Core inflation, excluding volatile items, also rose to 3.2 percent, indicating broadening price pressures. The BSP described the hike as preemptive, intended to anchor inflation expectations and prevent second-round effects, such as wage adjustments that could make price increases more persistent.

BSP Governor Eli Remolona Jr. emphasized the shift during a post-meeting briefing, stating, "It's fairly safe to say the easing cycle is over." He noted...