Standard Chartered economists Jonathan Koh and Edward Lee now anticipate that the Bangko Sentral ng Pilipinas (BSP) will maintain its policy rate at 4.25% in April, postponing a previously expected 25 basis points hike to June [1]. The economists still project one rate increase this year to safeguard price stability, and have revised their 2026 Consumer Price Index (CPI) inflation forecast upward to 4.5% from 4.0% following higher-than-expected March inflation [1].
The rationale for the expected pause includes the BSP's reluctance to tighten policy in response to a supply-driven inflation shock, as monetary policy is seen as less effective in such scenarios. This approach aligns with the BSP's decision to hold rates steady at the off-cycle March meeting [1]. Despite March inflation reaching 4.1%, which exceeded the BSP's forecast range of 3.1-3.9%, underlying demand-side inflation pressures are described as benign. Seasonally adjusted month-on-month core inflation was in line with its typical upward trend, indicating that the pass-through from non-core inflation remains contained [1].
BSP Governor Remolona's recent comments suggest there is room for a pause, with policy decisions currently guided by inflation expectations, core inflation, and prices faced by the bottom 30% of households. Inflation expectations are reported as anchored, core inflation reflects subdued demand pressures, and inflation for the lowest-income households in March (4.2% year-on-year) was broadly in line with headline inflation (4.1%) [1].
However, Standard Chartered maintains its call for a rate hike later in the year, citing risks that inflation pass-through could accelerate in the coming months. Factors such as faster fiscal disbursements, potential transport fare hikes, higher rice and restaurant prices linked to fertilizer costs, and PHP-driven imported inflation may begin to lift inflation expectations, which could prompt the BSP to deliver a one-off rate hike to ensure price stability [1].
CONCLUSION
Standard Chartered expects the BSP to delay its next rate hike until June, citing supply-driven inflation and subdued demand pressures. However, risks of rising inflation in the coming months may still prompt a one-off rate increase to maintain price stability. The market is likely to interpret this as a cautious but vigilant stance from the BSP.