UOB economists Julia Goh and Loke Siew Ting report that Philippine inflation unexpectedly eased in May, but it remains above the Bangko Sentral ng Pilipinas (BSP) target, keeping inflation risks tilted to the upside [1]. Despite the softer-than-expected inflation data and subdued first quarter 2026 GDP growth, UOB expects the BSP to proceed with a gradual tightening path. Specifically, they forecast a 25 basis point hike to 4.75% at the 18 June Monetary Board meeting, followed by another 25 basis point increase to 5.00% in the third quarter of 2026 [1].
UOB maintains its full-year 2026 inflation forecast at 7.5%, which is higher than the BSP's estimate of 6.3% for the same period. For 2025, UOB projects inflation at 1.7% [1]. The economists note that the recent softer inflation print and weaker GDP growth are likely to temper the BSP’s policy response, reducing the likelihood of outsized rate hikes at the upcoming meeting [1].
The report highlights that the BSP's tightening measures are intended to anchor inflation expectations toward target by early 2027 while also preserving growth momentum amid ongoing global uncertainties. In addition to monetary policy, targeted fiscal measures—particularly those aimed at stabilizing food prices—are expected to complement the BSP's efforts [1].
No immediate market reaction or analyst opinions beyond UOB's projections are discussed in the article.
CONCLUSION
UOB expects the BSP to implement gradual rate hikes to address persistent inflation risks and support the Philippine Peso, with rates likely to reach 5.00% by the third quarter of 2026. The central bank's cautious approach aims to balance inflation control with economic growth, supported by targeted fiscal measures.