BACK-TO-BACK interest rate hikes are likely as policymakers move aggressively to prevent rising global oil prices from triggering broader inflation pressures.
“The market needs to understand that we will do what is necessary to contain inflation,” Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said in an interview with Bloomberg TV.
“At the moment, that seems like a succession of modest rate hikes.”
The BSP’s policymaking Monetary Board on Thursday raised key interest rates by 25 basis points (bps) and noted that the inflation outlook had “deteriorated” in the wake of war in the Middle East.
“We stay vigilant and we’ll do as many hikes as necessary, but I think we’re being proactive,” Remolona said.
“We’re trying to stay ahead of the curve.”
March’s sharp inflation rise – 4.1 percent from 2.4 percent a month earlier — was largely driven by the oil price shock and Remolona said the BSP was paying close attention to possible second-round effects.
“The spillover effects are still modest, and it’s the spillover effects that matter to us,” he said. “We can’t do very much about the shock itself.”
Central banks typically “look through” temporary supply-side shocks such as higher oil prices, Remolona said, but the situation has become large enough to warrant a stronger policy response.
As this developed, BMI said the BSP could raise key rates one more time in June and then pause given the likelihood of continued below-target economic growth.
“Two consecutive 25 bps rate hikes should suffice for now, given the increasingly fragile growth backdrop,” the Fitch unit said.
BMI said that subdued economic growth — it expects a below-target 3.6-percent outturn for the first quarter — could limit further tightening.
Growth remains “constrained by the fallout from the corruption scandal, it said, adding that “manufacturing activity also appears to be losing momentum as a result of the US-Iran conflict.”
“Given the weak growth backdrop and limited fiscal space, we think the BSP will prefer to keep rates on hold to support the economy,” it added.
Growth slumped to 3.0 percent in the fourth quarter of 2025 as a flood control project scandal led to reduced government spending and also weighed on consumer and investor sentiment.
Full-year growth slowed to 4.4 percent from 5.6 a year earlier, missing the government’s 5.5- to 6.5-percent target. The scandal also prompted economic managers to lower this year’s goal to 5.0-6.0 percent from 6.0-7.0 percent.
Remolona said the Philippine economy would be able to absorb tighter financial conditions, with growth likely to hit around 4.5-4.6 percent and accelerate to as much as 6.0 percent next year if oil shock proves temporary.
