MANILA – The Bangko Sentral ng Pilipinas (BSP) is maintaining a cautious approach to monetary policy, signaling that interest rate increases will only be considered if inflationary pressures broaden beyond supply-side shocks. Governor Eli Remolona Jr. emphasized this stance in a recent interview, highlighting the central bank's deliberate wait-and-see strategy amid global economic turbulence.
"We needed a few more weeks to be clear about what needed to be done," Remolona stated, referencing the Monetary Board's decision to keep the benchmark rate at 4.25 percent during an off-cycle meeting last month. "The next policy meeting is on the 23rd. So, by then, we expect that we'll have a much better sense of where we stand."
The central bank's restraint comes as the Philippines grapples with inflation driven by the ongoing conflict in the Middle East, which has severely disrupted global energy markets. As a net oil importer, the country has been hit hard, with pump prices soaring and inflation accelerating to 4.1 percent in March—slightly above the BSP's target range of 2 to 4 percent. In response, the government declared a national energy emergency, the first such move by any nation.
Remolona explained that raising rates prematurely would do little to curb supply-driven inflation while potentially straining an economy still recovering from recent domestic challenges. He noted that the current situation differs from past crises, such as the 2022 Russia-Ukraine war, adding, "This is kind of a new experience. The sense of uncertainty is bigger now than before."
Despite a recent glimmer of hope—a two-week ceasefire announced by U.S. President Donald Trump—the conflict has already sidelined nearly 20 percent of the world's oil supply, sending shockwaves through emerging markets. The International Monetary Fund has warned that the war could leave permanent scars on the global economy.
With inflation nearing a two-year high, many economists anticipate the BSP may implement its first rate hike in two years later this month. The last tightening occurred in October 2023, with an unexpected increase to 6.5 percent. However, Remolona stressed that any policy adjustment would depend on whether price pressures begin to feed into broader demand, underscoring the central bank's commitment to measured, data-driven decisions in a volatile economic landscape.