A quarter-point rise seen as near-certain
Persistent price pressures and the peso's slide to a record low last week are expected to push the Bangko Sentral ng Pilipinas into another quarter-point increase at its Thursday meeting. Nine economists surveyed by The Manila Times put the likely outcome at a rise in the Target Reverse Repurchase Rate to 5.25 percent. The Monetary Board, which has already lifted key rates three times this year because inflation has run above target, is set to convene on Oct. 22.[S1][S2]
At its Aug. 27 meeting the board raised the benchmark by 25 basis points to 5.0 percent, moving the overnight deposit and lending facilities to 4.5 percent and 5.5 percent. The central bank has flagged possible pressure on farm prices from severe El Niño conditions as an upside inflation risk, and has said wage adjustments deserve close watching for their effect on price setting and second-round effects.[S1]
In September, consumer prices climbed 7.2 percent, pushed up by pricier staple foods and energy. As a result, inflation averaged 5.4 percent over the first nine months of 2026, which remains outside the central bank's 2.0- to 4.0-percent target range. Core inflation, a measure that excludes certain food and energy components, rose to 4.7 percent, up from 4.1 percent in August and 2.6 percent in the same month a year earlier.[S1]
Peso weakness fuels talk of a half-point move
Bank of the Philippine Islands lead economist Emilio Neri Jr. said the currency's recent softness, with the peso touching P63.06 on Thursday, strengthens the argument for tightening both this week and at the December meeting. How large the increase turns out to depend on how the peso trades in the days before the decision, he said, adding that a move toward 64 could open the door to a 50-basis-point hike.[S1]
Neri described a bigger increase as a possible pre-emptive step against second-round effects and the risk that inflation expectations come unmoored. Whichever size the central bank chooses, he argued, the balance of risks points toward more tightening over the coming six months. Sun Life Investment Management and Trust Corp. economist Patrick Ella put the probability of a hike at 93.6 percent, with a quarter-point move most likely but a half-point still possible, citing elevated inflation and a sharp rise in core prices.[S1]
Rizal Commercial Banking Corp. chief economist Michael Ricafort also said the central bank could raise rates again to help steady the exchange rate.[S1]
Several economists see the cycle ending here
Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, foresees just a 25-basis-point hike. He noted that last month's inflation figure was broadly in line with forecasts and said this would likely be the final increase barring a new supply-side shock. Alvin Arogo, an economist at Philippine National Bank, also described it as a possible conclusion to the current tightening cycle as focus shifts toward 2027, expecting inflation to fall below 4.0 percent by next year's third quarter, though he cautioned that costlier oil could still warrant a quarter-point move in December.[S1]
Chinabank economist Domini Velasquez said Thursday's quarter-point increase could be the final one of the cycle, pointing to a weak economy, a lower 2027 inflation forecast and the limited response of the peso to earlier hikes. She said the earlier pre-emptive tightening may offer some cushion against second-round price pressures.[S1]
HSBC Global Research senior economist Aris Dacanay said the central bank is likely to keep a hawkish tone to rein in inflation expectations, warning that the risk of inflation escaping its range is too large to disregard. HSBC expects another increase in December, to 5.50 percent, and while it has no hikes penciled in for 2027, Dacanay said a deeper tightening cycle cannot be ruled out.[S1]
Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines, said that even with soft growth and domestic demand, the central bank will continue to put inflation first, aiming to anchor expectations and prevent wider price pressures from taking hold. ING Economics said risks still lean toward the upside given uncertainty over El Niño-driven food supply disruptions, high energy prices, a weak peso and possible second-round effects from wage and food increases, and added that the central bank will probably act cautiously and keep a tightening bias until it is confident inflation is heading back to target.[S1]
