UOB economists Julia Goh and Loke Siew Ting report that Philippine inflation has surged to a 37-month high, prompting a significant upward revision to their 2026 inflation forecast and expectations for further monetary tightening by the Bangko Sentral ng Pilipinas (BSP) [1]. The economists now anticipate two additional 25 basis point hikes in the BSP's Reverse Repurchase (RRP) rate, bringing it to 5.00%, with the rate expected to be maintained through the end of 2026 [1].
The report highlights that ongoing energy supply disruptions related to the Middle East, combined with base effects and continued weakness in the Philippine peso (PHP), could push inflation toward or above 10% by year-end if the conflict persists [1]. The sharper-than-expected increase in April inflation has led UOB to revise its full-year 2026 inflation forecast to 7.5%, up from 5.5% in April, and significantly higher than the BSP's estimate of 6.3% for 2026 and 1.7% for 2025 [1]. This would mark the highest annual inflation rate since 2008 [1].
UOB's outlook aligns with the BSP's hawkish April Monetary Policy Statement and the Governor's guidance, which emphasize a measured, data-dependent approach in response to ongoing uncertainties stemming from the Middle East [1]. The economists believe that the additional rate hikes are necessary to contain inflationary pressures while still supporting medium-term growth, given ongoing fiscal support [1].
CONCLUSION
The surge in Philippine inflation has led UOB to forecast further rate hikes by the BSP, with the RRP rate expected to reach 5.00% and remain at that level through 2026. Persistent inflationary pressures, driven by external shocks and currency weakness, are prompting a more hawkish monetary stance to stabilize prices and support economic growth.