The jump in the March inflation rate has set the stage for a potential 50-basis-point (bp) rate hike by the Bangko Sentral ng Pilipinas (BSP) during the second quarter, according to global investment banking giant Goldman Sachs.

In an April 7 report obtained by Manila Bulletin, Goldman Sachs Economics Research noted that the “upside surprise” in the Philippines’ March consumer price index (CPI) inflation figure was what it described as a “sharp rise” in the month-on-month print.

The headline rate rose to a 20-month high and above-target 4.1 percent year-on-year last month, while Philippine Statistics Authority (PSA) data showed a 1.6-percent month-on-month price growth versus February.

Goldman Sachs earlier expected only a 3.8-percent headline inflation for March and a 1.2-percent month-on-month rise.

National Statistician and PSA chief Claire Dennis S. Mapa told Manila Bulletin that the seasonally adjusted month-on-month inflation in March was the highest in the PSA’s 2018-based series.

This means price levels last March jumped from February levels the fastest as the war in the Middle East raged on.

Manila Bulletin sought BSP Governor Eli M. Remolona Jr.’s comment on March’s record month-on-month price hikes, but he did not reply.

Goldman Sachs noted that at the BSP’s off-cycle monetary policy meeting last month, monetary authorities signaled closer scrutiny of core and underlying inflation amid expectations that energy-driven price pressures would be limited, but core inflation still accelerated to 3.2 percent in March from 2.9 percent last February, alongside broader upticks in underlying indicators.

While Goldman Sachs sees some relief from the Department of Trade and Industry’s (DTI) agreement with local businesses to freeze prices of basic necessities until mid-April, “after that, the economy could see a broad-based increase in the prices of frequently purchased, highly visible consumer goods.”

“Looking ahead, these factors raise the risk of a broader cost pass-through to CPI components beyond transport fuels,” Goldman Sachs warned.

As such, “we maintain our expectations for the BSP to hike the policy rate by 50 bps in the second quarter,” Goldman Sachs said.

The BSP’s policy-setting Monetary Board (MB) will tackle interest rates during its upcoming April 23 and June 18 meetings, even as Remolona had said off-cycle decisions—including rate hikes—may come as the central bank receives the latest pertinent data.

The MB kept the policy rate at 4.25 percent during the surprise off-cycle meeting in March, and Singapore-based United Overseas Bank Ltd. (UOB) still expects the central bank to hold on to current interest rate levels.

“Given the duration and severity of the Middle East conflict remain uncertain while the Philippines’ economy is still recovering from the fallout of public works-related scandals, we believe the BSP will likely look through supply-driven inflation pressures and prioritize sustaining domestic growth momentum and jobs in the immediate term,” UOB senior economist Julia Goh and economist Loke Siew Ting said in an April 7 report.

“Although core inflation rose to a near two-year high of 3.2 percent in March, it remains below the seven-year historical average of 3.7 percent, suggesting limited evidence of demand-driven inflation pressures at this juncture. Thus, we continue to expect the BSP to maintain its policy rate at 4.25 percent at the April 23 meeting,” they added.

UOB raised its full-year 2026 Philippine inflation forecast to 5.5 percent from three percent previously, driven by the sharper-than-expected March print and prolonged disruptions from the Middle East conflict.

The Singaporean bank said that weakness in the Philippine peso and base effects are expected to further fuel price pressures, making government interventions on key essentials critical to containing inflation.

The peso fell to record-low levels, nearing the ₱61:$1 threshold last week.