Philippine Central Bank: Monetary policy is still in a tightening cycle and inflation is expected to peak in a few months

China News Service, Manila, November 4 (Reporter Zhou Jing) Philippine Central Bank Governor Ray Molona said on the 3rd that given that inflation is still high, the Philippine central bank is currently in a monetary tightening cycle and expects inflation to peak in the next few months.

Remolona said in an interview that day that the inflation rate will not drop quickly, and the central bank will continue to pay close attention to price trends and formulate monetary policies taking into account inflation levels and economic growth. It is unclear whether the tightening cycle will extend into 2027.

The Philippines' overall inflation rate rose to 7.2% in September, the highest in the past five months; the core inflation rate rose to 4.7%, a new high in the past three years. The Philippine central bank previously predicted that the overall inflation rate will average 6.1% in 2026, about 6% in 2027, and will fall back to 3.3% in 2028, still higher than the 3% policy target.

The Monetary Committee of the Philippine central bank decided to raise interest rates by 50 basis points in October, raising the benchmark interest rate to 5.5%. Since the beginning of this year, the Philippine central bank has raised interest rates by a total of 125 basis points to curb inflationary pressures.

Remolona said that the core inflation rate is a key monitoring indicator for the central bank to formulate monetary policy. The central bank will also focus on the output gap, which is the difference between actual economic growth and potential growth levels. If the output gap becomes significantly negative, the central bank will be less likely to tighten monetary policy further.

The Philippines' GDP grew by 2.3% year-on-year in the second quarter of this year, the lowest growth rate since the epidemic; in the first half of the year, the economy grew by 2.6% year-on-year, lower than the full-year economic growth target of 3.5%, and also significantly lower than the potential economic growth level of about 6%.

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