(Photo courtesy of PNA)
Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said Tuesday that the central bank remains on a monetary tightening path as inflation continues to exceed the government’s target.
Speaking on the sidelines of a luncheon meeting organized by the European Chamber of Commerce of the Philippines in Makati City, Remolona said the BSP would maintain its cautious policy stance as inflation takes time to ease.
“Nasa tightening pa tayo (We’re still tightening). The tightening might… you know, the inflation rate doesn’t adjust so quickly,” he said.
Headline inflation reached 7.2 percent in September, significantly above the government’s 3 percent target, prompting the BSP to raise its policy rate by 50 basis points in October.
The latest adjustment brought the central bank’s cumulative rate increases this year to 125 basis points as authorities continued efforts to contain rising consumer prices.
Remolona said inflation could peak in the next few months before gradually moderating.
The BSP earlier projected inflation to average 6.1 percent in 2026 and remain elevated at around 6 percent in 2027. Consumer price growth is expected to approach the 3 percent target only in 2028.
Despite persistent inflationary pressures, Remolona emphasized that the central bank also considers economic growth when determining whether further interest rate adjustments are necessary.
He explained that the BSP monitors the output gap, or the difference between actual economic performance and the economy’s potential growth.
“Mayroon tinatawag na output gap, yun ang difference between our actual growth rate and potential growth rate. So kung masyadong negative yon, less likely kami mag tighten,” he said.
(There is what we call an output gap, which is the difference between actual and potential growth. If that gap is significantly negative, we are less likely to tighten.)
Meanwhile, Remolona expressed optimism that economic activity would begin recovering in the fourth quarter of 2026 or early 2027.
He noted that government efforts to accelerate public spending could help support economic growth in the coming months.
“So, the government is trying very hard to accelerate spending,” Remolona said.
The BSP’s monetary policy decisions will continue to balance the need to control inflation with efforts to sustain economic recovery.
