The Bangko Sentral ng Pilipinas (BSP) could be compelled to hike its policy interest rate to 6 percent if the Middle East conflict extends beyond May, according to HSBC, which cautioned that rising food prices could trigger a "second wave" of inflation.
Aris Dacanay, senior economist at HSBC Global Investment Research, said consumer prices might soar as high as 8.1 percent in the final quarter of 2026 if the turmoil persists. The surge would be driven more by increasing food costs than energy prices, as the Philippines begins to feel the delayed impact of a global fertilizer shortage.
Speaking at a media roundtable, Dacanay warned that a prolonged conflict could push average inflation this year to 6.3 percent, before easing to 4.5 percent in 2027. These figures would remain above the BSP's target range of 2 to 4 percent.
The economist highlighted that approximately one-third of the world's seaborne fertilizer trade passes through the Strait of Hormuz, a critical shipping lane disrupted by the conflict. Higher fertilizer costs could fuel food inflation later this year if the fighting continues.
"We are talking about a global shortage of fertilizer, which will affect the yields of food supply perhaps in three or six months' time," Dacanay said. "It is the second wave of inflation that we need to anticipate."
The BSP's Monetary Board recently raised the benchmark rate by a quarter point to 4.5 percent, a move described as "preemptive" given the deteriorating inflation outlook. The central bank now expects inflation to average 6.3 percent this year and 4.3 percent in 2027.
BSP Governor Eli Remolona Jr. said the latest rate increase aims to prevent spillover effects and keep inflation expectations anchored. Dacanay noted that a prolonged conflict may force the central bank to raise the key rate to 6 percent. "Basically, the BSP has a very difficult job," he said. "You're faced with stagflationary risks where unemployment is currently rising, growth is slowing."
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