The Bangko Sentral ng Pilipinas (BSP) should raise its benchmark interest rate by a quarter percentage point on Thursday to combat broadening price pressures that are beginning to weigh on private consumption, according to New York-based GlobalSource Partners Inc.

In a commentary released April 22, GlobalSource Economist Diwa Guinigundo said the central bank faces a “clear policy imperative” to shift toward tightening as inflationary drivers become more persistent.

“We therefore believe that the BSP will initiate monetary policy tightening at tomorrow’s [April 23] meeting of the Monetary Board (MB),” Guinigundo said, noting that a 25-basis-point (bp) hike in the 4.25 percent benchmark rate is “justified, with readiness to follow through as conditions evolve.”

He noted that the shift from supply-driven shocks to demand-side transmission is now “firmly” underway. What were once isolated geopolitical tensions in the Middle East have manifested as elevated fuel prices that have cascaded into broader transport, freight, and logistics costs.

Guinigundo said these second-round effects are now spreading across goods and services, with utility rate adjustments currently imminent.

What complicates the inflation outlook is the restoration of rice tariffs, which Guinigundo identified as a risk, given rice's heavy weighting in the consumer price index. He argued that these are no longer temporary shocks, as they are becoming deeply embedded in the price system.

He also raised concerns about the deterioration of business and consumer outlooks. Guinigundo cautioned that inflation expectations are at risk of becoming “unanchored,” a state where policy intervention becomes both more expensive and less effective.

He likewise stressed the delayed impact of the BSP's recent policy easing, which has reduced the key policy rate by a cumulative 225 basis points (bps) since late 2024. Even with the inflation forecast being above the target at 5.1 percent for the full year of 2026, the BSP maintained a pause in March.

For Guinigundo, a measured tightening of the monetary belt would help restore policy credibility as price hikes sift through the broader economy.

While the BSP previously propped up economic growth by easing borrowing costs, the policy's transmission was described as “uneven” due to external volatility, prompting banks to pull back on lending.

Such factors, Guinigundo said, strengthen the case for a more decisive move from the BSP.

Under prolonged supply disruptions, GlobalSource suggests that the BSP must move swiftly to avoid the much higher costs associated with delayed action.

“The cost of acting late will far exceed the cost of acting now. Monetary policy must move ahead of the curve, not behind it,” Guinigundo stressed.