Another rate hike seen

The central bank's upcoming interest rate decision is primarily influenced by persistent inflation pressures and the peso's recent depreciation. While a 25-basis-point hike is widely anticipated by polled economists, a larger 50-basis-point increase remains a possibility, particularly if the peso continues to weaken. This more aggressive approach could be a preemptive measure to manage inflation expectations and mitigate potential second-round effects on prices.

The BSP faces a challenge in balancing inflation control with other economic factors. The central bank itself noted that severe El Niño conditions could impact agricultural prices, and potential wage adjustments warrant close monitoring for their implications on broader price setting. Consumer price growth for the first nine months of 2026 averaged 5.4 percent, exceeding the BSP’s target range of 2.0 to 4.0 percent.

Economists are divided on whether this will be the final rate hike in the current tightening cycle. Some analysts expect inflation to return below 4.0 percent by the third quarter of next year, suggesting a potential end to increases. However, others caution that the outlook remains vulnerable to factors like higher oil prices, which could justify further tightening into December or beyond.