Inflation shocks are no longer being treated as “temporary disruptions,” as the Bangko Sentral ng Pilipinas (BSP) signals readiness to respond more aggressively while oil-driven price pressures continue to spread across the economy.
The central bank said it is considering an off-cycle interest rate hike as worsening inflation risks linked to the Middle East conflict threaten to push prices further beyond the target range.
In an interview on One News’ ‘Money Talks with Cathy Yang’ dated May 21, BSP Governor Eli Remoloma stated that the Monetary Board is weighing whether to deliver another rate increase before its scheduled June 18 policy meeting.
“I wouldn’t say likely. We’re considering it,” Remolona said when asked about potential off-cycle tightening.
He added the central bank may also wait for the release of the May inflation report on June 5 before deciding whether to act ahead of schedule.
“At this point, it’s a toss-up whether we do an off-cycle or we just wait for the regular meeting,” he noted.
Meanwhile, the BSP chief mentioned that persistent supply shocks from the Middle East conflict are creating "stagflation risks," with inflation accelerating even as economic growth slows.
He explained the central bank is now treating the oil-related shock "differently" because of its scale and prolonged effects on consumer prices.
“But now this is a big supply shock, and it’s a persistent supply shock. So, we have to react aggressively,” he added.
Remolona said the central bank may have “underestimated” how quickly rising oil prices would spill over into other goods such as rice and fertilizer.
“There’s a risk that we are behind the curve,” he said, referring to the central bank’s inflation response.
The governor noted that the BSP remains active in the foreign exchange market to reduce excessive volatility after the peso recently hit historic lows against the United States dollar.
Remolona added that the BSP does not want inflation to ease simply because consumers are “spending less,” emphasizing that it still expects household spending to recover while it works to stabilize prices.
To recall, the BSP began a new tightening cycle during its April 23 meeting after raising benchmark interest rates by 25 basis points to 4.5 percent, marking its first increase in more than two years.
Inflation surged to 7.2 percent in April from 4.1 percent in March—exceeding the BSP’s forecast range and breaching the central bank’s two-to-four percent target.
The peso closed at P61.75 per dollar for two straight trading days earlier this week before recovering slightly on Thursday to finish at P61.581.
Written by Ericko Malimban, Insight PH
Ericko Malimban, Insight PH is a dedicated campus journalist and contributor. Their insightful writing sparks meaningful conversations and keeps the community informed.
