THE Bangko Sentral ng Pilipinas’ (BSP) easing cycle has ended, a Fitch Group unit said, but monetary authorities are likely to keep rates on hold this year as weak economic growth is tempering the case for monetary tightening.
“Inflation is likely to breach the BSP’s 2–4 percent inflation target range in the coming months, but sluggish growth will keep the BSP on hold rather than tighten,” BMI Country Risk & Industry Research said in a commentary released on Monday.
“As such, we expect the BSP to hold rates steady at 4.25 percent through 2026,” it added.
BMI said that rising global oil prices linked to geopolitical tensions, particularly the US-Iran conflict, had shifted its earlier view that the BSP could resume rate cuts as early as April.
It noted that supply-induced price shocks were likely to push inflation above the central bank’s target range in the coming months.
BMI raised its inflation forecast to 3.2 percent for this year from 3.1 percent previously, but added that a further upward revision was likely if the Middle East conflict shifts to its less benign “Extend To End” scenario where the war persists through April.
The BSP has revised its 2026 average inflation forecast to 5.1 percent from 3.6 percent, largely reflecting higher assumptions for global oil prices.
BMI said it was premature to expect rate hikes as the anticipated increase in inflation was likely to be supply-driven and therefore less responsive to monetary policy adjustments.
“While inflation will probably rise significantly, the BSP notes that it will be supply-driven and monetary policy is not well placed to tackle that,” it said.
The research firm added that softer economic growth would also weaken the case for tightening. It noted that the BSP itself has flagged continued weak growth in 2026 and warned that raising rates could delay the recovery.
Still, BMI said the risks remained tilted toward possible rate hikes later in the year if supply shocks persist. A prolonged conflict that keeps fuel prices elevated could trigger broader second-round inflation pressures, potentially prompting the BSP to tighten policy.
“Given that fuel prices largely dictate the cost of logistics that underpin the modern economy, a prolonged conflict ... would leave strong, broad-based second-round inflationary pressures in its wake, prompting the BSP to hike,” BMI said.