THE Bangko Sentral ng Pilipinas (BSP) may raise interest rates anew in December as persistent inflationary pressures and a weakening peso provide a good scenario for an even tighter monetary policy, an international research and analysis firm said.
According to BMI, a unit of Fitch Solutions, another 25-basis point increase following the central bank’s larger-than-expected 50-bps hike on Thursday is likely.
In its Oct. 22 Philippine Macro Insight report, BMI forecast the key rates of the BSP will end the year at 5.75 percent, revising higher the research firm’s earlier forecast of 5.50 percent.
BMI said the central bank remained concerned about the inflation outlook and had expressed openness to further rate increases.
“Persistent inflationary pressures should keep the BSP on a tightening bias,” BMI said, citing higher global energy prices, recent transportation fare increases and El Niño-related food price pressures.
The research firm maintained its 2026 inflation forecast at 5.9 percent, below the BSP’s 6.1-percent projection.
For 2027, BMI forecast inflation at 5.4 percent, compared with the central bank’s revised estimate of 6 percent.
BMI said inflation will remain above the BSP’s 2- to 4-percent target through next year, keeping the real policy rate negative and reinforcing the case for further monetary tightening.
Currency weakness is another factor supporting its rate-hike outlook, BMI said.
Despite the BSP’s 50-basis-point increase, the peso continued to weaken, trading near record lows at P63.50 per dollar at the time of the release of BMI’s report.
The research firm revised its end-2026 peso forecast to P63 per dollar from P61 previously, citing a more hawkish United States Federal Reserve and higher oil prices.
BMI said another rate hike in December could help cushion pressure on the currency and limit the effects of imported inflation.
However, the firm expects sluggish economic growth to keep the BSP from raising rates further after December, as elevated inflation and the cumulative effects of monetary tightening weigh on household spending and investment.
BMI projected Philippine gross domestic product growth of 4.5 percent in 2027, below the government’s 5- to 6-percent target.
It warned that further monetary tightening beyond its forecast could push growth even further below the government’s goal.
BMI expects the BSP to begin easing monetary policy toward the end of 2027 as inflation moderates. It projects inflation to peak in the first quarter before falling below 4 percent by the fourth quarter, allowing the central bank to cut rates by a cumulative 50 basis points to 5.25 percent by year-end.
BMI, however, said their outlook remains subject to risks, including escalating tensions between the United States and Iran that could disrupt oil supplies, severe El Niño conditions that could drive food prices higher, and further peso depreciation.
BMI said a weakening peso beyond P64 per dollar could prompt the BSP to consider larger rate increases to support the currency, particularly as foreign exchange reserves fell to a three-year low in September.
