Standard Chartered economists Jonathan Koh and Edward Lee now expect Bangko Sentral ng Pilipinas (BSP) to keep its policy rate at 4.25% in April, delaying a previously anticipated 25 bps hike to June. They still foresee one rate increase to safeguard price stability and have raised their 2026 Consumer Price Index (CPI) inflation forecast to 4.5% from 4.0% after higher March inflation.

BSP pause expected before single hike

"First, the central bank may be reluctant to tighten policy in response to a supply‑driven inflation shock, where monetary policy effectiveness is limited – this would be consistent with its decision to stay on hold at the off‑cycle March meeting."

"Second, despite March inflation (4.1%) exceeding its forecast range (3.1-3.9%), underlying demand‑side inflation pressures remain benign. Our estimate of seasonally adjusted m/m core inflation was in line with its typical upward trajectory, suggesting that pass-through from non‑core inflation remains contained."

"Third, BSP Governor Remolona’s recent remarks indicate scope for a pause, with policy decision at the moment guided by three key indicators: inflation expectations, core inflation, and prices faced by the bottom 30% of households. Inflation expectations remain anchored; core inflation continues to reflect subdued demand pressures; and inflation for the lowest‑income households in March (4.2% y/y) was broadly in line with headline inflation (4.1%)."

"That said, we do not remove our rate hike call. Inflation pass-through is likely to pick up in the coming months, supported by faster fiscal disbursements, eventual likely transport fare hikes, higher rice (and eventually restaurant) prices linked to fertiliser costs, and PHP‑driven imported inflation. These risks may begin to lift inflation expectations, prompting BSP to deliver a one‑off rate hike to safeguard price stability."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)