Peso touches fresh record low after surprise BSP pause

The Philippine peso reached a new record low of 60.47 per US dollar on March 26, 2026, following the Bangko Sentral ng Pilipinas (BSP) surprise decision to maintain its benchmark interest rate at 4.25% during an off-cycle monetary policy meeting. The BSP's Monetary Board held an unscheduled meeting to address mounting economic pressures from Middle East geopolitical tensions that threatened oil supply routes through the Strait of Hormuz, affecting 20% of global oil supply. BSP Governor Eli Remolona Jr. explained that the central bank opted to pause rate hikes despite rising inflation risks because monetary policy tools are less effective against supply-side shocks like oil price increases, and premature tightening could harm the Philippines' economic recovery from recent corruption scandals.

The peso's depreciation accelerated throughout March 2026, first breaching the 60-per-dollar threshold on March 19 when it fell to 60.40 during morning trading, then sinking further to 60.3 by subsequent sessions before reaching the 60.47 record low. The currency weakness stemmed from multiple factors: rising global oil prices near $100 per barrel, US President Donald Trump's warnings about potential strikes on Iran's energy infrastructure, and the strengthening US dollar amid global uncertainty. As the Philippines imports over 90% of its crude oil, the country remains particularly vulnerable to fuel price fluctuations.

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In its official statement, the BSP revised its inflation forecasts upward, projecting average inflation of 5.1% for 2026 (up from 3.6%), which would breach the central bank's 2-4% target range, with inflation expected to peak near 5% in April 2026. For 2027, the BSP forecasts inflation at 3.8% (up from 3.2%), expecting price pressures to ease back toward the target range. Despite these projections, the BSP emphasized that inflation expectations remain anchored and that it continues to monitor secondary effects of supply shocks on domestic prices.

The central bank's dovish stance surprised financial markets, with analysts describing the decision as focusing on initial shock pass-through while watching for secondary effects. Metrobank analysts forecast the BSP's first rate hike would likely occur in June 2026, with cumulative increases of 50 basis points expected by year-end, bringing the policy rate to 4.75%. The BSP indicated it had intervened in foreign exchange markets to stabilize the peso against further depreciation and cautioned that sustained oil prices above $100 per barrel might eventually necessitate interest rate increases. The next scheduled monetary policy meeting is set for April 23, 2026.