Philippines , Apr 10, 2025
The Bangko Sentral ng Pilipinas (BSP) has raised its benchmark interest rate by another 25 basis points to 6.75%—its highest level in over a decade—in an aggressive attempt to rein in stubborn inflation that has weighed heavily on household budgets and small businesses.
Governor Eli Remolona stated that while inflation has eased from last year’s peak of 8.7%, price pressures remain elevated due to volatile food and fuel costs. March 2025 figures show inflation hovering at 4.4%, above the BSP’s target range of 2–4%. “We must act decisively to anchor inflation expectations and restore purchasing power,” Remolona said at a press briefing.
The decision has triggered mixed reactions from economic stakeholders. For low-income families, the rate hike translates to higher loan repayment costs and tighter access to credit. “Our sari-sari store loan just became more expensive,” said Maricel Cruz, a micro-retailer in Quezon City. “We’re already stretched.”
Small and medium-sized enterprises (SMEs) are also feeling the squeeze. “Credit is drying up just when we’re trying to expand post-pandemic,” noted Raymond Santos, who runs a food processing business in Cavite.
In contrast, analysts say the move sends a strong signal of fiscal discipline, especially amid regional comparisons. Vietnam, for instance, has opted to hold rates steady amid moderating inflation, while Indonesia raised rates last month in anticipation of imported price shocks from weakening currency trends.
BSP officials argue that early tightening now may prevent more drastic measures later. “A calibrated, preemptive approach helps avoid economic overheating,” said Deputy Governor Francisco Dakila.
However, some economists warn that prolonged high rates could choke off recovery in key sectors such as construction, manufacturing, and retail. “There’s a risk we’re dampening demand more than necessary,” said economist Guia David of Ateneo de Manila University.
Looking ahead, the BSP hinted at further hikes if inflation expectations remain sticky, while closely monitoring external risks such as rising oil prices and currency volatility. For now, Filipinos are bracing for the double-edged impact of fighting inflation—through a costlier credit environment.
