The Bangko Sentral ng Pilipinas (BSP) signaled a more aggressive path for monetary policy, with the central bank chief indicating readiness to deliver “as many hikes as necessary” to curb domestic price pressures resulting from global oil supply shocks.

Following the central bank’s first interest rate increase in two years, BSP Governor Eli Remolona Jr. said in an April 24 interview with Bloomberg that policymakers are adopting a proactive stance to stay ahead of the inflation curve.

The decision to initiate the tightening cycle saw significant debate within the Monetary Board, with the BSP governor describing the choice between a standard move and a larger 50-basis-point hike as a “close call.”

Remolona said that the BSP monitors shocks, noting that the current surge in prices is “more than modest.” This prompts a closer look at second-round impacts, spreading through broader price stability.

To contain these pressures, a succession of “modest rate hikes” could be expected depending on the anchoring of inflation expectations.

“Normally, it would be a succession of small rate hikes, but it will depend on how big the spillover effects are. We have to just watch the data and measure expectations,” Remolona said.

Remolona clarified that while expectations have risen to reflect current inflation, they have not yet become “unanchored.”

Despite the tightening mode, the BSP maintains a rosy outlook for the Philippine economy, with resilience expected to be bolstered by overseas Filipino remittances. Remolona described this front as “surprisingly resilient” and a “very stable source of foreign exchange (forex)” despite geopolitical tensions in the Middle East.

Meanwhile, the consensus among foreign and local financial institutions leans toward continued tightening, with at least one 25-basis-point (bps) hike. Frankfurt-based Deutsche Bank AG, Singapore-based UOB, and Oversea-Chinese Banking Corp. (OCBC) expect two more quarter-point hikes, bringing the policy rate to five percent.

UOB senior economist Julia Goh and economist Loke Siew Ting expect a quarter-point hike each in June and the third quarter.

“While the BSP emphasised a measured and data-dependent approach amid ongoing Middle East-related uncertainties, the policy bias has clearly turned hawkish,” Goh and Ting said, noting that the BSP is no longer reacting but is managing a “deteriorating inflation outlook and faster-than-expected spillovers from higher global oil and fertiliser prices into domestic fuel and food costs.”

Like UOB, OCBC Group Research also noted that the BSP’s shift in strategy is “no longer just reacting to an external price shock but is becoming more concerned about broader second-round effects.”

Similarly, Deutsche Bank Research believes the central bank is “likely to continue with its monetary policy tightening and would choose to act sooner rather than later, especially as it had already forecast above-target inflation for two years over 2026–2027.”

In a report acquired by Manila Bulletin, Goldman Sachs said the BSP’s April decision signals the beginning of a hiking cycle.

“With BSP’s rhetoric increasingly focused on preventing a de-anchoring of expectations, the risks are tilted to the upside,” the lender’s analysts Chris Poh and Danny Suwanapruti said, particularly anticipating another 25-bps hike in June and being open to more in the second half of 2026.

British banking giant Barclays said in a commentary also acquired by Manila Bulletin that the central bank’s decision was “far from a complete surprise to us.”

Barclays economist Bryan Tan noted that following the hike, which the lender correctly projected, Barclays continues to pencil in another 25-bp rate hike in June, with Tan noting the risk of “more tightening, especially in August, if global inflation proves more persistent than we expect.”

Tan further said that more hawkish 50-bps hikes would only be mulled over by the BSP if the central bank “feels it needs some shock and awe to quell inflation expectations.”

“We believe the more dovish members of the MB would push back hard against larger hikes unless there is a convincing need for the central bank to demonstrate its resolve in fighting inflation so aggressively,” Tan said.

Fitch Solutions unit BMI and Manulife Investment Management (MIM) also expect further tightening by the BSP, with the former pricing in one more quarter-point hike to 4.75 percent to be delivered in June.

“For the Philippine economy, this means tighter financial conditions ahead—higher borrowing costs and a more cautious credit cycle—while also providing some support to currency stability and helping prevent the inflation shock from becoming more persistent,” said Jean De Castro, head of fixed income at Manulife.

De Castro said a 25-basis-point hike is unlikely to bring inflation back to target quickly if oil and food prices remain high.

“If [risks tied to energy prices] persist, I believe additional measured hikes are plausible rather than a one-and-done move,” she added.