Bangko Sentral ng Pilipinas

Bangko Sentral’s policy rate held at 6.25% for fifth straight time

Lance Spencer Yu

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Bangko Sentral’s policy rate held at 6.25% for fifth straight time

BSP. The Bangko Sentral ng Pilipinas headquarters in Quezon City on May 31, 2023.

Jire Carreon/Rappler

(1st UPDATE) Although the key policy rate has stayed at the same level since March, rates could go up by November depending on 'how bad the data is,' Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. says

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) kept its key policy rate at 6.25% for the fifth consecutive time as it expects inflation to still come under control soon.

In a rate-setting meeting on Thursday, September 21, the central bank’s Monetary Board decided not to lower or raise its monetary policy rate, which it has maintained since March, when it last hiked the rate by 25 basis points (bps).

The BSP has hiked its key policy rate – which influences interest rates charged by banks – by a total of 425 bps since May 2022 in an effort to rein in persistent inflation.

In August 2023, headline inflation rose to 5.3%, ending six straight months of deceleration and pushing the inflation rate even further from the government’s target range of 2% to 4%.

The central bank’s inflation forecasts have also gone up, with average inflation in 2023 expected to reach 5.8% instead of 5.6%, while the forecast for 2024 also rose to 3.5% from 3.3%. The forecast for 2025 remains unchanged at 3.4%. 

BSP Governor Eli Remolona Jr. now expects inflation to fall within the target range by November rather than September.

“The path itself will be slightly higher. But fourth quarter, yes, back on the target path,” Remolona said during a press conference. “And then first quarter 2024, it will go down. And then because of base effects, it will rise again, maybe to the edge of the upper part of the range, and then settle down within the target range.”

He emphasized that rate cuts are “off the table” for the rest of 2023, but another rate hike could come by November.

“A rate hike is on the table for November. How big it will be will depend on the data, how bad the data is with respect to inflation, especially,” Remolona said.

The BSP governor worried that higher transport prices and electricity rates could put pressure on inflation, especially as fare hike petitions have already been filed for jeepneys and the Metro Rail Transit Line 3.

This also marks the first time that the Monetary Board set a target reverse repurchase rate since the central bank announced its shift to a variable-rate auction format in early September. The BSP explained that the target RRP rate will now serve as its key policy rate.

“These changes in the RRP facility are part of the BSP’s set of planned reforms dating back to the adoption of the interest rate corridor framework in 2016. They are largely operational in nature and do not constitute any shift in the BSP’s monetary policy stance,” the central bank said in a press release on September 4.

In the United States, the Federal Reserve also maintained interest rates on Wednesday, September 20. –

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Lance Spencer Yu

Lance Spencer Yu is a multimedia reporter who covers the transportation, tourism, infrastructure, finance, agriculture, and corporate sectors, as well as macroeconomic issues.