NEARLY two weeks ahead of its fourth rate-setting meeting for the year, the central bank said it is still keeping an eye on an ‘unpredictable opponent’ as it is currently caught in the middle of a weaker-than-expected growth rate and a dubious disinflation path.
At the Economic Forum hosted by the Economic Journalists Association of the Philippines (EJAP) on Friday, Bangko Sentral ng Pilipinas Governor Eli M. Remolona Jr. did not divulge what the Monetary Board intends to do at its upcoming rate-setting meeting as it still looking at several data points, including the price of oil, and sentiments of businesses and consumers.
Asked which data points are still being scrutinized apart from the latest inflation and gross domestic product prints, Remolona told reporters: ‘A lot. Sentiments. [There are several] data points.’
But depending on how strong the price pressure seems to be, the BSP governor said the central bank is looking at expectations, at how the other items in the [consumer price index] CPI respond to the continuing global shocks, adding, ‘that will affect our policy strategy.’
In terms of inflation, Remolona said the central bank cannot do very much about inflation arising directly from global supply shocks.
‘What we can do is try to temper inflation that is found in the second-round goods,’ he said, adding that the second-round effects of supply shocks are ‘very close’ to what core inflation is.
However, with weaker-than-expected growth rate, Remolona dropped a hint that the BSP may become less aggressive in terms of raising the policy rate in order to tame inflation.
‘So with the growth numbers and with the inflation numbers, I think we need a more convincing downard trend for inflation before we can relax,’ the chief of the central bank said.
‘Of course the weaker growth that we’re seeing means we can be less aggressive in trying to tame inflation. But in the face of an unpredictable opponent, oil prices for example, we need to keep our eye on the ball,’ Remolona pointed out.
In his presentation during the forum, Remolona admitted that the central bank was ‘disappointed’ when the 2.3-percent growth print was reported.
‘We were told that GDP growth in the second quarter of 2026 was 2.3 percent. [It was quite low, quite] disappointing and somewhat surprising,’ added Remolona.
The BSP governor bared that the 2.3-percent growth outcome in the second quarter of 2026 was way below the central bank’s 3.2-percent estimate, which, as it is, is ‘still weak’ because the potential growth of the Philippine economy is at 5.5 to 5.8 percent.
‘That means weak growth remains a consideration. I think that’s all I can say. I can’t tell you what we will do,’ added Remolona.
In an earlier interview with reporters, the BSP governor answered in the affirmative when he was asked if the pressure on the central bank to raise the key interest rate was reduced following the 2.3-percent GDP data release.
The BSP has raised the key interest rate by a total of 50 basis points since the start of the conflict in the Middle East on February 28, delivering two separate quarter-point rate hikes at the Monetary Board’s rate-setting meetings held on April 23 and June 18.
These policy actions brought the Target Reverse Repurchase (RRP) rate to 4.75 percent.
At its June 18 meeting, the Monetary Board decided that monetary policy tightening was ‘warranted’ to keep inflation expectations anchored and mitigate the risk of second-round effects.
‘The measured monetary policy action will also complement fiscal measures in supporting steady consumption and strengthening business sentiment,’ the central bank also said in a statement on June 18.