BSP rate vs Fed rate: a 100 bp gap after the Fed's hike, and what to watch on 22 October
The BSP's 5.00% policy rate is 100 basis points above the Federal Reserve's 4.00% upper bound after the Fed's 16 September hike. How the gap has moved since 2019, what the BSP decided in 2026, the real rate after 7.2% inflation, and the late-October meeting calendar.
The Federal Reserve raised its target range by a quarter point on 16 September 2026, to 3.75%–4.00%, its first hike since July 2023. The Bangko Sentral ng Pilipinas had already raised its own rate three times this year. Both central banks meet again within a week of each other in late October.
How wide is the gap between the BSP rate and the Fed rate?
The BSP’s target reverse repurchase (RRP) rate is 100 basis points above the Fed’s upper bound. The BSP rate has been 5.00% since the Monetary Board’s 27 August 2026 decision, with the overnight deposit rate at 4.50% and the overnight lending rate at 5.50%. The Fed’s range has been 3.75%–4.00% since its 16 September statement.
BSP target RRP rate (5.00%) minus the top of the Fed's target range (4.00%), as of 17 October 2026. CapsWindow calculation.
Throughout this note the gap is the BSP rate minus the Fed’s upper bound, in basis points (100 bp = 1 percentage point), with no rounding.
How has the gap moved since 2019?
The BSP rate has been above the Fed’s upper bound at every reference point below. Year-end BSP values are from the BIS central bank policy rate series, and the Fed values from FRED.
How has the gap moved since 2019?
Gap (calculated)
Shared linear scale from zero. Selected entries from the table below. Its dates, units, definitions and limitations still apply.
| Reference point | BSP rate | Fed upper bound | Gap (calculated) |
|---|---|---|---|
| End-2019 | 4.00% | 1.75% | +225 bp |
| End-2022 | 5.50% | 4.50% | +100 bp |
| 26 July 2023 (Fed peak) | 6.25% | 5.50% | +75 bp |
| End-2023 | 6.50% | 5.50% | +100 bp |
| End-2024 | 5.75% | 4.50% | +125 bp |
| End-2025 | 4.50% | 3.75% | +75 bp |
| 17 October 2026 | 5.00% | 4.00% | +100 bp |
The widest gap in this table was before the pandemic. When the Fed’s hiking cycle peaked in July 2023 the BSP was 75 bp above it, and by end-2025 both banks had cut and the gap was back at +75 bp. Since then the BSP has added a net 50 bp and the Fed 25 bp, so the gap has widened by 25 bp. These seven points do not show every move in between.
What has the BSP decided in 2026?
One cut, one hold and three hikes, according to BSP releases cross-checked with BIS daily data.
| Monetary Board meeting | Decision | Target RRP rate |
|---|---|---|
| 19 February | Cut 25 bp | 4.25% |
| 26 March | Hold | 4.25% |
| 23 April | Hike 25 bp | 4.50% |
| 18 June | Hike 25 bp | 4.75% |
| 27 August | Hike 25 bp | 5.00% |
The order matters for the gap. The Fed held at its January, March, April, June and July meetings, so the BSP’s three hikes from April to August all widened the gap on their own. The Fed’s September hike then narrowed it by 25 bp. Behind the BSP’s moves is inflation: 7.2% in September 2026, up from 6.1% in August and the highest since March 2023.
What is left after inflation?
A negative real rate. The simple real policy rate here is the policy rate minus the latest headline inflation rate.
| Market | Policy rate | Gap vs Fed upper bound | Latest inflation (month) | Real policy rate (calculated) |
|---|---|---|---|---|
| Indonesia | 5.75% | +175 bp | 3.28% (Sep) | +2.47 points |
| Philippines | 5.00% | +100 bp | 7.2% (Sep) | −2.20 points |
| Vietnam (refinancing rate) | 4.50% | +50 bp | 5.08% (Sep) | −0.58 points |
| Hong Kong (Base Rate) | 4.25% | +25 bp | 1.7% (Aug) | +2.55 points |
| United States | 3.75%–4.00% | — | 3.7% (Sep) | +0.30 points (upper bound) |
| Malaysia | 2.75% | −125 bp | 1.9% (Aug) | +0.85 points |
| Taiwan | 2.00% | −200 bp | 2.73% (Sep) | −0.73 points |
| Japan | about 1.25% | −275 bp | 1.9% (Aug) | −0.65 points |
| Thailand | 1.00% | −300 bp | 2.82% (Sep) | −1.82 points |
The Philippines has the second-widest positive gap over the Fed in this table, and the most negative real policy rate. Against the Fed’s +0.30 points (US CPI from the BLS, September 2026), the real gap is about −2.5 points (calculated). If the BSP raised its rate to 5.25% with inflation unchanged, the Philippine real rate would be −1.95 points.
What should you watch in late October?
Two meetings six days apart. The BSP’s Monetary Board meets on Thursday 22 October, followed by its last meeting of the year on 17 December, according to BusinessWorld. The FOMC meets on 27–28 October and again on 8–9 December (Fed calendar); the October decision comes on 28 October in Washington, early on 29 October in Manila.
Market pricing for the Fed moved quickly this week. CME FedWatch put the chance of an October hike at 41.5% on 14 October. On 16 October, after Fed Chair Kevin Warsh said “I don’t prejudge meetings”, reported odds were 15% to 17%, depending on the time checked.
For the BSP, MUFG expects a 25 bp hike to 5.25%, and PNB economist Alvin Arogo expects the same. BusinessWorld reported that BMI, ING, Maybank, Nomura and UOB also expected an October hike. These are forecasts.
| If the BSP… | and the Fed… | BSP rate | Fed upper bound | Gap |
|---|---|---|---|---|
| holds | holds | 5.00% | 4.00% | +100 bp |
| hikes 25 bp | holds | 5.25% | 4.00% | +125 bp |
| holds | hikes 25 bp | 5.00% | 4.25% | +75 bp |
| hikes 25 bp | hikes 25 bp | 5.25% | 4.25% | +100 bp |
This table is arithmetic, not a prediction. It shows that the same gap can come from very different decisions.
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Does a wider gap support the peso?
Not on its own, and not in 2026. Since end-2025 the gap widened from +75 to +100 bp. Over roughly the same period the peso weakened 6.53%, from ₱58.79 on 29 December 2025 to a record low close of ₱62.90 on 8 October 2026, according to Bankers Association of the Philippines data reported by BusinessWorld. The economists quoted that day named oil prices, US Treasury yields and the strong dollar, not the policy rate gap.
A policy rate gap is a short-term interest rate difference. What investors weigh is the return after inflation, expected currency moves and risk, and on those measures the 100 bp headline overstates the Philippine advantage.
The gap uses the top of the Fed's range; the midpoint would add 12.5 basis points. Real rates subtract past inflation, and the inflation months differ by market (August or September 2026). The BSP website could not be opened directly for this note, so its meeting dates come from BusinessWorld and year-end rates from the BIS series. FedWatch odds change during the day and are quoted from press reports. The scenarios are arithmetic and say nothing about which decision is more likely.
Questions & answers
Why compare the BSP rate with the top of the Fed's range?
The Fed sets a range, 3.75% to 4.00% since 16 September 2026, while the BSP sets a single target rate. This note uses the upper bound throughout so the gap is consistent across years. Using the midpoint of 3.875% instead would make the current gap 112.5 basis points (calculated).
Will the BSP raise rates on 22 October?
That is not known yet. MUFG and PNB economist Alvin Arogo expect a 25 basis point hike to 5.25%, and BusinessWorld reported that BMI, ING, Maybank, Nomura and UOB also expected an October hike. These are forecasts, not decisions.
What happens to the gap if the Fed hikes and the BSP does not?
Arithmetically, the Fed's upper bound would rise to 4.25% and the gap would narrow to +75 basis points. If the BSP hikes to 5.25% and the Fed holds, the gap becomes +125. These are scenarios, not predictions.
Does a wider gap make the peso stronger?
Not in 2026. The gap widened from +75 to +100 basis points since end-2025 while the peso weakened 6.53% to a record low close of ₱62.90 on 8 October. Economists quoted by BusinessWorld pointed to oil prices, US yields and the strong dollar.
Source
- Federal Reserve - FOMC statement, 16 September 2026 ↗
- FRED - Federal funds target range, upper limit (DFEDTARU) ↗
- Federal Reserve - FOMC meeting calendar ↗
- BIS - Central bank policy rates, Philippines (monthly) ↗
- Bangko Sentral ng Pilipinas - Monetary Board decision, 27 August 2026 ↗
- US Bureau of Labor Statistics - Consumer Price Index, September 2026 ↗
- Philstar - Philippine inflation jumps to 7.2% in September 2026 ↗
- BusinessWorld - Peso plunges to new all-time low close (8 October 2026) ↗
- BusinessWorld - BSP may deliver fourth straight rate hike (7 October 2026) ↗
- MUFG Research - Asia FX Weekly, 16 October 2026 ↗
- Daily Tribune - PNB on the next BSP move (16 October 2026) ↗
- Yahoo Finance (24/7 Wall St.) - CME FedWatch odds, 14 October 2026 ↗
- Cointelegraph - Fed hike odds after Warsh remarks (16 October 2026) ↗