PHP: Inflation shock drives hawkish BSP path – UOB

UOB economists Julia Goh and Loke Siew Ting highlight that Philippine inflation has surged to a 37‑month high, forcing a sharp upward revision to the 2026 forecast. They now expect the central bank of the Philippines, Bangko Sentral ng Pilipinas (BSP) to deliver two further 25 bps hikes, taking the Reverse Repurchase (RRP) rate to 5.00% and holding it there through end‑2026.

Surging CPI cements further BSP hikes

"Ongoing Middle East-related energy supply disruptions, compounded by base effects and continued PHP weakness, could drive inflation toward—or above—10% by year-end if the conflict persists."

"The sharper-than-expected jump in Apr inflation has forced us to revise our full-year 2026 inflation forecast upward again to 7.5% (from 5.5% revised in Apr; BSP est: 6.3%; 2025: 1.7%), marking the highest annual rate since 2008."

"Overall, the latest inflation data reinforces our view that two additional 25bps hikes in the target reverse repurchase (RRP) rate—one in Jun and another in 3Q26—are warranted to contain inflationary pressures while remaining supportive of medium-term growth amid ongoing fiscal support."

"This would lift the RRP rate to 5.00%, which we expect to be maintained through end-2026."

"Our outlook is consistent with the BSP’s hawkish Apr Monetary Policy Statement and the Governor’s guidance highlighting a measured, data-dependent approach amid lingering Middle East-related uncertainties."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)