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BSP raises policy rate by 50 basis points to 5.50% and lifts its 2027 inflation forecast

Published Data as of PhilippinesMacro & households
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Key points

Implications for lenders

With the policy rate at 5.50% and inflation at 7.2%, lenders may face higher funding costs while borrowers' real incomes are squeezed, which can weaken repayment on unsecured consumer loans. Affordability checks and pricing for new loans can be reviewed against the BSP's 6.0% forecast for 2027 rather than a quick return to target.

Implications

ExecutivesFunding costs for Philippine lenders are likely to rise again after the larger-than-expected increase, and the BSP has signalled that December could bring another.
InvestorsA 2027 inflation forecast well above the target range points to a longer period of high rates than the market expected before the meeting.
OperatorsBorrowers with variable-rate loans and households with high food and transport spending face the most pressure on repayment capacity.

Facts

Decision: at its meeting on 22 October 2026, the Monetary Board raised the target reverse repurchase rate to 5.50%, up from 5.0%. 1 The increase of 50 basis points was the BSP's first 50-basis-point move since February 2023 2 and brings cumulative increases since April to 125 basis points (four straight increases; the three earlier moves were 25 basis points each). 3 The overnight deposit facility rate is now 5.00% 4 and the overnight lending facility rate 6.00%. 5 Before the meeting, 12 of 13 economists in a Philstar poll had expected an increase. 6

Inflation: headline inflation was 7.2% in September, up from 6.1% in August; matches April 2026, 7 and core inflation 4.7%. 8 The BSP kept its average inflation forecast for 2026 at 6.1% 9 and raised the 2027 forecast to 6.0%, up from 5.4% in August; 10 the 2028 forecast stayed at 3.3%. 11 The target range is 2–4%. 12 BSP said inflation could accelerate in the fourth quarter and stay elevated into early 2027, and named a stronger El Niño, through farm output and food prices, as the largest risk.

Peso and guidance: Governor Eli Remolona said the BSP is "not hiking the policy rate to defend the peso", which closed at PHP 63.52 per US dollar after the announcement, third straight record closing low. 13 The BSP described its stance as restrictive but said it was unsure whether it was restrictive enough, and did not rule out a further increase of any size at its 17 December meeting.

Analysis

Time series: headline inflation has stayed above the 2–4% target range through the hiking cycle, rising from 4.1% in March 14 to 7.2% in September (see chart). The BSP's 2027 forecast has risen at each recent meeting, from 4.5% in June 15 to 5.4% in August 16 and 6.0% now, so the BSP expects high inflation to last well beyond 2026.

Region: the Philippines is moving in the opposite direction to its maritime neighbours. Bank Indonesia held its rate at 5.75% on 21 October 17 with inflation at 3.28%, 18 and Malaysia's policy rate stood at 2.75% 19 with September inflation at 1.8%. 20 In both of those markets the policy rate is above headline inflation; in the Philippines, even at 5.50%, it is still below it.

Headline CPI inflation (%)
024684.12026-037.22026-046.82026-056.42026-066.22026-076.12026-087.22026-09
Headline CPI inflation (%)
2026-034.1
2026-047.2
2026-056.8
2026-066.4
2026-076.2
2026-086.1
2026-097.2

Year-on-year change in the national consumer price index (PSA, 2018=100), monthly · Source: Philippine Statistics Authority, Summary Inflation Reports (2026-03, 2026-04, 2026-05, 2026-06, 2026-07, 2026-08, 2026-09)

Counterpoints and uncertainties

The policy rate remains below headline inflation, so further increases are possible if El Niño lifts food prices; on the other hand, the BSP expects growth to recover only by early 2027, and weaker demand could slow inflation faster than forecast. Peso weakness adds imported inflation that the rate increase alone may not offset. The BSP's next Monetary Policy Report will set out the assumptions behind the forecasts and the size of the El Niño risk.

Key figures

  1. BSP policy rate after the 22 October 2026 meeting: 5.50% (up from 5.0%). BSP target reverse repurchase (RRP) rate. Philippines, national. Basis date: 22 Oct 2026. Source: Philstar: Inflation risks prompt BSP to hike rates anew (2026-10-22)
  2. Size of BSP rate increase, 22 October 2026: 50 basis points (first 50-basis-point move since February 2023). Increase in the BSP target RRP rate at the 22 October 2026 Monetary Board meeting. Philippines, national. Basis date: 22 Oct 2026. Source: Philstar: Inflation risks prompt BSP to hike rates anew (2026-10-22)
  3. Cumulative BSP rate increases since April 2026: 125 basis points (four straight increases; the three earlier moves were 25 basis points each). Total increase in the BSP target RRP rate from April to October 2026. Philippines, national. Basis date: 22 Oct 2026. Source: Philstar: Inflation risks prompt BSP to hike rates anew (2026-10-22)
  4. BSP overnight deposit facility rate, October 2026: 5.00% (raised alongside the policy rate). BSP overnight deposit facility rate after the 22 October 2026 decision. Philippines, national. Basis date: 22 Oct 2026. Source: Philstar: Inflation risks prompt BSP to hike rates anew (2026-10-22)
  5. BSP overnight lending facility rate, October 2026: 6.00% (raised alongside the policy rate). BSP overnight lending facility rate after the 22 October 2026 decision. Philippines, national. Basis date: 22 Oct 2026. Source: Philstar: Inflation risks prompt BSP to hike rates anew (2026-10-22)
  6. Economists expecting a BSP rate hike on 22 October: 12 of 13. Economists in a Philstar poll expecting an increase at the 22 October 2026 Monetary Board meeting (most 25bp; two 50bp). Philippines. Basis date: 19 Oct 2026. Source: Philstar: Poll: Another hike in BSP rates looms (2026-10-19)
  7. Headline CPI inflation (PSA): 7.2% (up from 6.1% in August; matches April 2026). Year-on-year change in the consumer price index. Philippines, national. Basis date: 30 Sep 2026. Source: Inquirer: PH inflation climbs to 7.2% in September (2026-10-06)
  8. Core inflation (PSA): 4.7% (nearly three-year high). Year-on-year change in the CPI excluding selected volatile food and energy items. Philippines, national. Basis date: 30 Sep 2026. Source: Inquirer: PH inflation surged to 3-yr high of 7.2% in September (2026-10-07, PSA data)
  9. BSP inflation forecast for 2026 (October 2026): 6.1% (unchanged from the August forecast). BSP forecast of average annual CPI inflation, 2026, as presented on 22 October 2026. Philippines, national. Basis date: 22 Oct 2026. Source: Philstar: Inflation risks prompt BSP to hike rates anew (2026-10-22)
  10. BSP inflation forecast for 2027 (October 2026): 6.0% (up from 5.4% in August). BSP forecast of average annual CPI inflation, 2027, including the October rate increase. Philippines, national. Basis date: 22 Oct 2026. Source: Philstar: Inflation risks prompt BSP to hike rates anew (2026-10-22)
  11. BSP inflation forecast for 2028 (October 2026): 3.3% (unchanged). BSP forecast of average annual CPI inflation, 2028, as presented on 22 October 2026. Philippines, national. Basis date: 22 Oct 2026. Source: Philstar: Inflation risks prompt BSP to hike rates anew (2026-10-22)
  12. Government inflation target: 2–4%. Official inflation target range. Philippines, national. Basis date: 4 Sep 2026. Source: GMA News: Inflation slows down for fourth straight month at 6.1% in August
  13. Peso closing rate, 22 October 2026: PHP 63.52 per US dollar (third straight record closing low). Peso–US dollar closing rate shortly after the BSP announcement. Philippines, national. Basis date: 22 Oct 2026. Source: Daily Tribune: BSP delivers 'jumbo' 50-basis-point rate hike (2026-10-22)
  14. Headline CPI inflation, March 2026 (PSA): 4.1%. Year-on-year change in the consumer price index. Philippines, national. Basis date: 31 Mar 2026. Source: PSA: Summary Inflation Report CPI (2018=100), April 2026 (2026-05-05)
  15. BSP average inflation forecast, 2027: 4.5%. BSP baseline forecast of average annual CPI inflation (June 2026 meeting). Philippines, national. Basis date: 18 Jun 2026. Source: Philippine News Agency: BSP hikes policy rates by another 25 basis points (2026-06-18)
  16. BSP average inflation forecast, 2027 (August 2026 meeting): 5.4% (raised from 4.5% at the June 2026 meeting). BSP baseline forecast of average annual CPI inflation, 2027. Philippines, national. Basis date: 28 Aug 2026. Source: Inquirer: BSP raises policy rate to 5%; peso sinks to new low (2026-08-28)
  17. BI-Rate (October 2026 decision): 5.75% (unchanged from September). Bank Indonesia benchmark policy rate. Indonesia, national. Basis date: 21 Oct 2026. Source: Bank Indonesia press release No. 28/233/DKom: BI-Rate Tetap 5,75%: Memperkuat Stabilitas, Mendorong Pertumbuhan Ekonomi (2026-10-21)
  18. Headline CPI inflation (BPS): 3.28% (up from 3.19% in August). Year-on-year change in the consumer price index. Indonesia, national. Basis date: 30 Sep 2026. Source: ANTARA: Inflasi tahunan RI capai 3,28 persen pada September 2026 (2026-10-01, BPS data)
  19. Overnight Policy Rate (BNM): 2.75% (unchanged). Bank Negara Malaysia policy rate. Malaysia, national. Basis date: 3 Sep 2026. Source: Bank Negara Malaysia: Monetary Policy Statement (3 September 2026)
  20. Consumer price inflation, September 2026 (DOSM): 1.8% (down from 1.9% in August). Year-on-year change in the consumer price index (DOSM). Malaysia, national. Basis date: 30 Sep 2026. Source: DOSM: Consumer Price Index, Malaysia, September 2026 (release, 2026-10-19)

Sources

  1. Philstar: Inflation risks prompt BSP to hike rates anew (2026-10-22)
  2. Daily Tribune: BSP delivers 'jumbo' 50-basis-point rate hike (2026-10-22)
  3. Philstar: Poll: Another hike in BSP rates (2026-10-19)
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A Japanese version of this article is available: 日本語版

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