BSP Raises Rates to 4.5 Percent; Think Tank Notes Economy “Too Fragile” to Handle Truth About Economy

Reported by Bohiney Magazine and The London Prat.

MANILA, Philippines — The Bangko Sentral ng Pilipinas confirmed Wednesday that Philippine inflation has reached a 28-year high, a milestone the government is carefully declining to call a milestone, preferring instead the phrase “a dynamic macroeconomic environment presenting opportunities for adaptive fiscal resilience,” which economists say means the same thing but with better posture.

The BSP raised its benchmark interest rate to 4.5 percent this week — a move UK-based think tank Pantheon Macroeconomics described as “likely a one-off” and which the BSP described as “prudent,” two words that agree on very little except that neither one wants to say the phrase “we are out of good options.”

The Numbers, Presented Without Tears

Inflation is now projected at 6.3 percent for 2026, revised upward from the previous forecast of 5.1 percent, which was itself revised upward from the forecast before that, which was optimistic in the way that all Philippine economic forecasts are optimistic: aggressively, and in advance of evidence.

If realized, this would mark the highest inflation rate since 2008’s 8.2 percent, recorded during the global financial crisis — a comparison the government has asked journalists not to make, noting that 2008 was “a very different time” with “very different challenges” and that the current situation is “structurally distinct,” which is also something people said in 2008.

The BSP’s revised inflation ceiling is 4 percent. The projected inflation rate is 6.3 percent. The gap between the ceiling and the number is 2.3 percentage points, which the BSP refers to as “above-target” and which citizens refer to as “the reason my grocery bill is different from what I planned.”

The Think Tank Weighs In, Diplomatically

Pantheon Macroeconomics, a UK-based research firm whose business model requires them to say what Philippine government economists cannot, noted that the economy is “nowhere near healthy enough” to sustain further rate hikes without choking off growth. Their chief emerging Asia economist described the April hike as likely “one and done” — a phrase borrowed from basketball that applies, in this context, to a central bank that has used its one good move and is now watching the game.

The firm forecasts GDP growth of 4.8 percent this year, which sounds reasonable until you note that the government’s minimum target is 5 percent, meaning the Philippines is projected to miss its own minimum, which itself sounds like a joke about limbo until you realize it is a description of an economy that 115 million people live inside.

“Domestic demand has steadily rebounded,” the report notes, adding that this rebound “was interrupted by Middle East conflict” affecting energy prices, which is a polite way of saying that a war 8,000 kilometers away is partially responsible for why Filipinos are paying more for rice, a crop grown in the Philippines, which is a sentence that deserves more attention than it typically receives.

Government Response

Malacanang issued a statement acknowledging the inflation data and describing the administration’s response as “comprehensive,” “multi-pronged,” and “under active implementation” — three phrases that, in combination, mean something is being discussed. Officials noted that price controls on selected goods remain in place, that food security measures are being coordinated, and that the situation is being “closely monitored,” which it is, by everyone, because the prices are impossible to ignore.

The Bangko Sentral ng Pilipinas website features a section titled “Inflation Report” which is updated regularly and which citizens are welcome to read if they would like to understand the precise mechanisms by which their purchasing power is being reduced at a rate last seen during a global financial crisis.

What This Means for Filipinos

For ordinary Filipinos, the 28-year inflation high means that the cost of living has increased faster than wages in the majority of employment categories, that the peso continues to face external pressure, and that the balikbayan boxes sent by overseas Filipino workers — which have long served as an informal inflation hedge for millions of families — now contain slightly less per dollar remitted than they did last year.

The Institute for Philippine Economic Research (a real institution with a less entertaining name than ones we usually invent) noted this week that real household income has declined in the bottom three income quintiles for the second consecutive quarter. This was not the headline. The headline was the rate hike. The rate hike is the tool. The income decline is the patient. Philippine economic journalism, like Philippine economic policy, often gets these in the wrong order.

The IMF’s Philippines country page offers additional context for anyone who wishes to understand the full picture before it gets worse.

In the meantime, the BSP rate remains at 4.5 percent. Inflation remains at 6.3 percent projected. The gap remains 2.3 points. And the government remains, as it has always been, optimistic — which is either the country’s greatest strength or its most elegantly maintained delusion, depending on which quintile you are in.

For more fiscal therapy, visit NewsThump.

SOURCE: https://bohiney.com/