- Decision
- Raise
- Rate change
- 50 bps
- target reverse repurchase rate
- 5.5%
The Central Bank of the Philippines’ Monetary Board raised its target reverse repurchase rate by 50 basis points to 5.50%, citing broadening price pressures and further upside inflation risks, after cutting the rate to 4.25% in February and raising it in quarter-point steps in April, June and August. Overnight deposit and lending facility rates were adjusted to 5.00% and 6.00%, respectively. Headline inflation is expected to accelerate in the coming months, remain high in 2027 and approach the 3.0% target in 2028, while core inflation is projected to rise further. Domestic economic activity is expected to recover with fiscal support. Higher transport fares have materialized as an upside inflation risk, while El Niño continues to threaten agricultural production and prices. Renewed tensions in the Middle East have pushed global oil prices higher. The central bank said the increase would make monetary policy appropriately restrictive to contain second-round effects and anchor inflation expectations, and signalled readiness to take further action to ensure inflation returns to target.
Rate evolution
Over the period, the Central Bank of the Philippines raised the Target Reverse Repurchase (RRP) Rate by a net 25 basis points to 5.50%, initially easing from 5.25% to 4.25%, signalling late in 2025 that easing was nearly over, pausing in March 2026 and then reversing course with increases from April. The earlier cuts reflected a moderated then benign inflation outlook and well-anchored expectations, which gave room to support activity as United States trade-policy uncertainty weighed on global growth and, later, weaker domestic demand and business sentiment were linked to governance concerns over infrastructure spending, even as the Board flagged pressure from oil, electricity and rice tariffs.
Amid uncertainty, it held the policy rate at 4.25% in March 2026 as Middle East oil and fertilizer shocks were seen as supply-led and tightening could delay recovery, then raised it to 4.50% in April as fuel and food price pass-through, rising core inflation, projections above the 4.0% tolerance ceiling in 2026 and 2027, and higher expectations pointed to more persistent pressures. On 17 June, the Board increased the rate to 4.75% as elevated global oil and fertilizer prices continued to drive domestic fuel and food prices, core inflation signalled broader pressures and second-round effects, and projections showed headline inflation breaching the ceiling in 2026 and 2027 and settling slightly above the 3.0% target in 2028.
On 26 August, it raised the rate by another 25 basis points to 5.0%, judging that volatile oil prices, the possible impact of severe El Niño conditions on agricultural prices, potential wage adjustments and broadening core price pressures required preemptive action, even as headline inflation had eased. The Board subsequently raised the policy rate by 50 basis points to 5.50% to contain second-round effects and anchor expectations as renewed Middle East tensions lifted oil prices, transportation fares increased and core inflation was projected to rise, with El Niño posing risks to agricultural production and prices and headline inflation expected to remain high in 2027 before approaching the 3.0% target in 2028.