BSP to Raise Interest Rate Despite Fed Uncertainty

The Bangko Sentral ng Pilipinas (BSP) is expected to raise its target reverse repurchase (RRP) rate by a quarter-point to 5.0 percent from 4.75 percent at its monetary policy meeting on August 27, despite uncertainty over the US Federal Reserve's next moves and potential market signals from a Jackson Hole symposium.

ANZ Research said in a commentary that whether Fed Chair Kevin Warsh offers near-term guidance on US interest rates at Jackson Hole is unlikely to alter their Asia rate profile. They expect Bank of Korea and Bangko Sentral ng Pilipinas to raise policy rates, with the BSP's policymaking Monetary Board having raised key policy rates twice this year to tame inflation.

The BSP's benchmark rate currently stands at 4.75 percent, while Philippine headline inflation has slowed for the last three months but remains well above the BSP's 3.0- to 4.0-percent target, with a July rate of 6.2 percent. ANZ said domestic inflation concerns will outweigh uncertainty surrounding the Fed's near-term policy direction.

ANZ expects Philippine growth to slow from 4.4 percent in 2025 to 3.9 percent this year before recovering to 5.0 percent in 2027 and 5.5 percent in 2028, with inflation forecast at 6.2 percent for 2026, 4.8 percent in 2027, and 4.1 percent in 2028.