After leaving policy interest rates unchanged at record lows since July 2009, the Bangko Sentral ng Pilipinas (BSP, the central bank) has begun to tighten monetary policy in response to accelerating inflation. At its most recent meeting on May 5th the BSP's monetary board raised overnight lending and borrowing rates by 25 basis points each, to 6.5% and 4.5% respectively, taking t0 50 basis points the cumulative increase in interest rates since monetary tightening began in March. Although the central bank will want to avoid sharp rises in interest rates, it may be forced to tighten monetary policy more aggressively to control inflation. The BSP has been one of the slowest to raise interest rates among the major central banks in South-east Asia. Strong inflows of foreign capital have contributed to low market interest rates in recent years, but Treasury yields will rise as global monetary conditions tighten, especially given the persistent fiscal deficit.