‘BSP rate hike still possible’

MANILA, Philippines — The Philippine central bank, the Bangko Sentral ng Pilipinas (BSP), may retain the option for additional interest rate hikes despite recent easing inflation, according to various banking perspectives. Though inflation decelerated in August, persisting risks from El Niño and fluctuating oil prices keep the central bank's policy in a state of flux.

BDO Unibank Inc. economist Alyssa Nuñez anticipates the central bank to maintain its policy rate at five percent in October, citing potential threats from weather disruptions and higher labor costs. "We continue to expect the BSP to pause at the October meeting, while acknowledging that upside risks have not disappeared entirely," Nuñez stated in a recent report.

Despite slowing inflation, core inflation, which filters out volatile food and energy prices, also showed a slight decline. Economists warn that El Niño-related supply disruptions and businesses passing on labor costs following Metro Manila's minimum wage hike could reignite persistent inflation pressures. China Banking Corp. chief economist Domini Velasquez echoes this sentiment, foreseeing a potential rise in inflation from September to November as comparisons with last year's prices become less favorable.

Velasquez also highlights the impact of volatile oil prices and a weaker peso, which makes imported goods costlier. Bank of the Philippine Islands' lead economist, Emilio Neri Jr., suggests further rate hikes, including a 25 basis point increase per meeting at the remaining two policy sessions this year, potentially pushing the benchmark to 5.5 percent.

Neri flags volatile oil prices and a possible super El Niño as major risks, with the latter's full impact expected in the first quarter of 2027. If these factors materialize before October, the case for a pause in policy tightening becomes more challenging to justify.