The Bangko Sentral ng Pilipinas raised rates for the fourth straight time at its Oct. 22 meeting, by 50 basis points to 5.5%, after September inflation jumped to 7.2%. Only two of 20 economists polled by the Inquirer had predicted the move. Nomura had seen a 25-basis-point hike that would have lifted the policy rate to 5.25%.
Price stability comes before growth
The BSP chose inflation control over a softening economy. September’s surge pushed average inflation for the first nine months of 2026 to 5.4%, above the central bank’s 2 to 4% target range. Core inflation, which strips out selected food and energy items, climbed to 4.7% from 4.1% in August, a sign of more second-round effects, according to Nomura.
As The Manila Times reports, Nomura places the BSP in the more hawkish camp of the Southeast Asian central banks it assessed, alongside Bank Negara Malaysia, and flags higher energy and fertilizer costs as ongoing drivers. Deutsche Bank also expected a 25-basis-point hike and argued that current policy might not be tight enough to anchor inflation expectations. Global oil near $100 a barrel, up from about $90 in August, adds to the pressure, Deutsche Bank noted.
The hiking cycle might not be over
The hiking cycle might not end with this hike. Nomura flagged the risk of further hikes, with the path depending heavily on El Niño and its effect on food prices. Governor Eli Remolona Jr. said policy is restrictive but “we don’t know for sure whether it’s restrictive enough,” and that the BSP remains open to raising rates further. The BSP itself trimmed its 2026 inflation forecast to 6.1% but raised its 2027 outlook to 5.4% from 4.5%.
A weak peso helps margins, but agents feel the squeeze
For investors and CFOs with Philippine exposure, that points to higher borrowing costs for longer and tighter consumer spending as households absorb rising prices. Companies relying on peso-denominated financing should review their refinancing timelines, while firms earning in dollars stand to benefit from the weaker peso.
For Philippine BPO companies, the peso’s slide past 63 to the dollar stretches USD contract revenue further and offers short-term margin relief. But that advantage is fragile.
Inflation above 7% erodes agents’ take-home pay, and a potential record P85 wage hike in Metro Manila would directly raise labor costs. Together, these pressures increase the risk of attrition, especially in competitive hubs where agents can move for small pay gains.
Providers will need to weigh retention spending against currency gains, and many will turn to food and transport allowances as quick relief. Clients should expect cost-of-living adjustments to come up in contract talks, and partners who plan for these pressures together now will avoid service disruptions later.
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Arceo, N. M. P. (2026, October 21). BSP seen keeping hawkish stance. Manila Times. Retrieved from https://www.manilatimes.net/2026/10/21/business/top-business/bsp-seen-keeping-hawkish-stance/2450193
Cigaral, I. N. P. (2026, October 23). BSP unleashes jumbo rate hike vs inflation. Inquirer.net. Retrieved from https://business.inquirer.net/617363/bsp-unleashes-jumbo-rate-hike-vs-inflation
