More interest rate increases may be on the horizon this year, analysts said, as the Bangko Sentral ng Pilipinas (BSP) emerges as one of the first central banks in Asia to tighten monetary policy in response to a global oil price shock that is raising the risk of stagflation in the country.
In a note, economists at Nomura said they expect another 25-basis-point increase in the third quarter, while warning that the central bank could front-load the move as early as its June meeting and follow with additional hikes.
“This is contingent on energy prices rising further, which will in turn depend on how the situation in the Middle East evolves in coming weeks,” they said.
“One key concern for BSP, in our view, is inflation expectations continue to rise. As we have argued before, any significant upside surprises to monthly [consumer price index] readings could be seen by BSP as a threat to its goal of anchoring inflation expectations,” they added.
Last week, the Monetary Board, the top policymaking body of the BSP, lifted the benchmark rate guiding bank lending costs by a quarter point to 4.5 percent. Ten out of 16 economists polled by the Inquirer foresaw this shift to hawkish policy.
Officials described the move as “preemptive,” citing a deteriorating inflation outlook as the conflict in the Middle East drags on. The central bank now expects inflation to average 6.3 percent this year and 4.3 percent in 2027, breaching its 2-percent to 4-percent target range.
The Philippines, which has declared a national energy emergency amid the turmoil, is grappling with supply-driven inflation—a challenge monetary policy cannot fully address and one that risks slowing a fragile economic recovery. BSP Governor Eli Remolona Jr. said the latest increase was meant to prevent spillover effects and keep inflation expectations in check.
Deepali Bhargava, economist at ING Bank, said front-loaded but measured hikes are likely ahead.
“We now expect an additional 50bp of hikes in 2026, assuming material de‑escalation in the US–Iran conflict by the end of second quarter,” Bhargava said. “However, should disruptions persist, and Brent prices remain above $100 per barrel for most of 2026, a deeper and more aggressive hiking cycle would likely follow.” — Ian Nicolas P. Cigaral INQ