The Philippine central bank raised interest rates for the third straight meeting, taking preemptive action against rising inflation risks from a severe El Nino event and possible wage increases.

Bangko Sentral ng Pilipinas raised its benchmark overnight reverse repurchase rate to 5.00% from 4.75%, diverging from some regional peers including Bank Indonesia and Bank of Thailand, which left their rates unchanged.

The BSP also raised its benchmark lending rate to 5.50% from 5.25%.

"The measured increases in BSP interest rates will continue to anchor inflation expectations of consumers and businesses, and mitigate further broadening of inflationary pressures," Gov. Eli Remolona said at a briefing.

Renewed Middle East tensions and the risk of a prolonged closure of the Strait of Hormuz have raised concerns that energy prices could stay elevated. The Philippines is particularly exposed because it relies heavily on imported fuel, including crude oil from the Middle East.

While inflation has moderated over the past three months, it remains above the BSP's target range.

Thursday's decision was widely expected, with 10 of 11 economists polled by The Wall Street Journal forecasting a rate increase. The central bank has now raised its policy rate by 75 basis points since April.

Asked whether the BSP is likely to raise rates again at its October meeting, Remolona said the central bank is "hoping that we won't need another rate hike."

The BSP lowered its 2026 inflation forecast to 6.1% from 6.4%, citing lower-than-expected inflation in June and July and declining oil prices.

The impact of El Nino on rice prices in the fourth quarter will partly offset those factors, said Rogelio V. Mercado Jr., assistant governor for the monetary policy sub-sector.

For 2027, the BSP raised its inflation forecast to 5.4% from 4.5%, citing the effects of a severe El Nino event on rice prices and higher minimum wages. It expects inflation to ease to around 3.3% in 2028.

Capital Economics reckons Thursday's move will mark the end of BSP's tightening cycle.

The Philippines' economic growth slowed further in the second quarter, hitting a multiyear low as weak household spending weighed on the economy.

"While the inflation fight has taken precedence in recent months, policymakers will also have one eye on the weakness of the economy," said CE's deputy chief emerging markets economist Jason Tuvey.