BSP tipped for fourth straight rate hike in October amid persistent inflation
Analysts expect the Bangko Sentral ng Pilipinas to deliver a fourth consecutive 25-basis-point rate hike this month, bringing the key policy rate to 5.25%. September inflation surged to a three-and-a-half-year high of 7.2%, driven by fuel, food and housing costs, keeping price pressures above the ce
The Bangko Sentral ng Pilipinas (BSP) may deliver a fourth straight rate hike this month, with further tightening possible as intensifying price pressures complicate its fight against inflation, analysts said. In a report on Wednesday, Fitch Solutions unit BMI said it expects the BSP to deliver a 25-basis-point (bp) hike this month to bring its key policy rate to 5.25%.
“Although the Bangko Sentral ng Pilipinas described its August hike as preemptive, the latest data suggest that inflationary pressures are proving more persistent,” BMI said. “We now expect the BSP to hike by another 25 bps in October, raising our end-2026 policy rate forecast to 5.25% from 5% previously.” In August, the Monetary Board tightened for a third straight meeting in a preemptive move to rein in inflation risks from severe El Niño, wage hike, and volatile global oil prices. It raised its key policy rate by 25 bps to an over one-year high of 5%, bringing its cumulative hikes to 75 bps since it first tightened in April.
Fresh surges in fuel, food, housing and utility prices drove headline inflation to its fastest pace in three-and-a-half years at 7.2% in September from 6.1% in August, matching this year’s peak recorded in April. This exceeded the 6.7% median estimate in a BusinessWorld poll of 22 analysts last week. Core inflation, which discounts volatile food and energy prices, also picked up to a nearly three-year high of 4.7% from 4.1% in the previous month. BMI raised its full-year inflation forecast to 5.9% this year from 5.7% previously, and to 5% in 2027 from 4.7%.
The peso’s persistent weakness also warrants further BSP tightening, especially as the US Federal Reserve’s rate hike prospects continue to weigh on the local unit, BMI added. The peso saw its weakest closing level at P62.86 on Sept. 14 and tumbled to its worst intraday trough of P62.925 on Sept. 15. As of end-September, the peso has slumped by P3.85 or 6.15% from its P58.79 finish on Dec. 29, 2025.
ING Bank N.V. noted that food price pressures are becoming more broad-based as domestic and external factors compound, even before the full impact of the “Super El Niño” is felt. “While El Niño-related weather disruptions are contributing to higher food prices, a significant share of the inflation transmission appears to be occurring through higher transportation and production costs linked to elevated fuel prices,” ING Regional Head of Research for Asia-Pacific Deepali Bhargava said. Food inflation heated up to an over three-year high of 6.7% in September from 4.6% in August.
Maybank Investment Bank sees room for two more 25-bp policy rate increases this year as the September print prompted the bank to raise its full-year inflation forecast. Maybank hiked its inflation projection to 5.9% this year from its prior 5.5% estimate. The Maybank economists noted that the BSP may hold its benchmark rate at 5.25% in 2027. Meanwhile, Japan-based Nomura Global Markets Research has also priced in a fourth straight 25-bp hike, with growing inflation risks opening room for additional tightening. In a separate report, Singapore-based United Overseas Bank Ltd. (UOB) said the BSP may tighten further until the first quarter of 2027 amid renewed inflationary pressures and projected Fed hikes. It expects three consecutive 25-bp rate increases at the BSP’s Oct. 22 and Dec. 17 meetings, and its first meeting in 2027.
However, BMI noted that the BSP’s October hike may cap its tightening cycle as the economy continues to grapple with sluggish growth. “Weak growth should limit tightening beyond October,” it said. BMI said the BSP could revert to easing by late next year as inflation moderates below the BSP’s 4% ceiling in the fourth quarter of 2027. It sees a total of 50 bps in rate cuts to bring the central bank’s benchmark borrowing cost to 4.75% by the end of 2027.
