The Bangko Sentral ng Pilipinas (BSP) has commenced a renewed tightening cycle by raising its Target Reverse Repurchase (RRP) rate to 4.50% and signaling the likelihood of further rate hikes in the near future, according to UOB economists Julia Goh and Loke Siew Ting [1]. The central bank's latest policy statement and post-meeting press conference emphasized that the rate hike on April 23, 2024, is intended to anchor inflation expectations and contain the build-up of second-round effects, while maintaining a measured pace of tightening to support medium-term economic recovery [1].
UOB now expects the BSP policy rate to reach 5.00% by the end of 2026, projecting two additional 25 basis point hikes—one in June and another in the third quarter of 2026—where the rate is anticipated to remain through the end of that year [1]. The BSP's forward guidance reflects a clear shift to a hawkish policy bias, prioritizing inflation risks over near-term growth concerns. The central bank projects headline inflation to exceed the 4% upper bound of its target range in both 2026 (at 6.3%, compared to 5.1% projected in March and UOB's estimate of 5.5%) and 2027 (at 4.3% versus 3.8% previously and UOB's estimate of 3.5%) [1]. Core inflation is also expected to approach the 4% tolerance ceiling, raising concerns about inflation expectations becoming de-anchored due to persistent price pressures from the prolonged Middle East crisis and ongoing fiscal support for growth [1].
The BSP has reiterated its commitment to a measured and data-dependent approach, noting that any further tightening will be gradual to avoid derailing the economic recovery [1]. The central bank affirmed its readiness to take all necessary monetary actions to ensure inflation returns to the 3.0% target, consistent with its primary mandate of maintaining price stability [1].
CONCLUSION
The BSP's renewed tightening cycle and hawkish stance underscore its focus on combating rising inflation risks, with further rate hikes expected through 2026. While the central bank aims to balance inflation control with economic recovery, market participants should anticipate a gradual but persistent tightening bias in the coming years.