UOB economists Julia Goh and Loke Siew Ting say Philippine inflation unexpectedly eased in May but remains above the Bangko Sentral ng Pilipinas (BSP) target, keeping risks tilted to the upside. They expect the BSP to hike by 25 bps to 4.75% on June 18 and by 25 bps to 5.00% in 3Q26, then keep rates on hold to meet expectations and support the Philippine peso (PHP).
BSP seems to be growing up to 5.00 percent
“Despite slower-than-expected headline inflation, risks to the near-term inflation outlook are tilted to the upside.”
“Thus, we retain our full-year 2026 inflation forecast at 7.5% for now (BSP forecast: 6.3%; 2025: 1.7%).”
“That said, the soft headline print along with slower 1Q26 GDP growth could weigh down the BSP’s policy response (of a steep rate hike) at the June 18 monetary board meeting.”
“We expect the reverse repurchase (RRP) rate to gradually increase by 25bps to 4.75%, followed by another 25bps increase to 5.00% in 3Q26, with rates then kept on target in early 2027 to strike a balance between stabilizing inflation expectations and maintaining growth momentum amid ongoing global uncertainties.”
“The tightening of monetary policy will also be complemented by targeted fiscal measures, particularly to stabilize food prices when necessary.”
(This article was created with the help of an artificial intelligence tool and reviewed by an editor.)
