Singapore-based DBS Bank Ltd. sees the Bangko Sentral ng Pilipinas (BSP) potentially calling another off-cycle policy meeting in May, where an interest rate hike may now be on the table, as war-driven pressures continue to weigh on the peso and raise the risk of elevated consumer prices staying beyond the comfort range.

In a report last Thursday, April 30, DBS senior economist Radhika Rao pointed to the BSP’s “decisively” hawkish guidance following the local monetary authority’s decision to raise the policy rate by a quarter point to 4.5 percent in April.

Rao also noted the central bank’s active debate on whether or not a bunched-up hike would have been appropriate in the latest policy meeting. This hawkish tone convinced the economist that the April hike could promptly be followed up with another increase this month as the peso remains under pressure.

“We revise our rate view for the year to include two more 25-basis-point (bp) hikes, one of which might be in May, as peso remains under pressure, and assuming limited respite in the Strait of Hormuz blockade,” Rao said. The next policy meeting is scheduled on June 18.

If realized, raising rates by a quarter point twice more could bring the benchmark rate to five percent by the end of the year.

Data monitored by DBS show the Philippines remains among the most exposed economies in the Association of Southeast Asian Nations (ASEAN) region to higher energy prices and supply disruptions stemming from tensions in the Middle East.

Such exposure prompted President Ferdinand R. Marcos Jr. to declare a national energy emergency in March.

Unlike some of its ASEAN peers, domestic pump prices largely mirror global oil movements due to the “absence” of broad-based fuel subsidies, intensifying the pass-through of global shocks to local price hikes.

Against this backdrop, the BSP moved preemptively in April, tightening monetary policy as it sought to contain inflation risks while maintaining confidence in domestic growth prospects.

BSP Governor Eli M. Remolona Jr. signaled optimism over economic expansion, citing a likely pickup in government spending that would allow the central bank to prioritize price stability amid mounting external pressures.

Rao noted that the central bank’s latest policy move echoed its approach in 2022, during the Ukraine war, when it front-loaded rate hikes to get ahead of inflation.

This was accompanied by a sharp upward revision in official BSP inflation forecasts, with projections now at 6.3 percent for 2026 from a previous 5.1 percent, and 4.3 percent for 2027 from 3.8 percent—both breaching the government’s four-percent ceiling for two consecutive years.

DBS also raised its inflation assumptions, now expecting inflation to average 5.8 percent in 2026 from below three percent previously, before easing to four percent in 2027. Rao cautioned that persistently high fuel and food costs could dampen household consumption, a key growth engine.

Rao further warned that despite the rollout of targeted subsidies, these measures may only partly offset the pressure on the broader economy.

DBS trimmed its 2026 growth forecast to 4.7 percent from five percent previously, citing the combined impacts of higher living costs and stalling government spending.

Despite this, the BSP’s tightening tilt suggests that anchoring inflation expectations remains the immediate priority, especially as the peso continues to face sustained external pressure.