The Philippine central bank faces an intensifying divide among private-sector economists over the trajectory of borrowing costs, with a lone dissenting voice branding recent monetary tightening as “misguided” following the sharp slowdown in economic output.

While a majority of analysts maintain a hawkish bias, Pantheon Macroeconomics is defying the consensus, arguing that Bangko Sentral ng Pilipinas (BSP) should halt its tightening cycle.

In a May 8 report, Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco and Economist Meekita Gupta challenged the BSP’s decision to lift the benchmark rate to 4.5 percent, suggesting that policymakers should keep rates steady for the remainder of 2026 before pivoting to an easing cycle in 2027.

The call for a pause comes as the Philippine economy recorded its weakest performance since the height of the pandemic. Gross domestic product (GDP) expanded by just 2.8 percent in the first quarter, a print Pantheon described as “terrible.” Chanco and Gupta noted that for an economy accustomed to robust expansion, even a four percent growth rate feels like a recession.

The first-quarter result was the weakest output in over 16 years, excluding the pandemic era, prompting Pantheon to slash its full-year 2026 growth forecast to four percent from 4.8 percent. This revised outlook falls well below the government’s minimum target of five percent.

The analysts argued that the BSP’s recent aggression is misplaced because price pressures remain largely driven by supply-side disruptions rather than overheating demand.

They warned that a recovery is unlikely until household consumption—the primary engine of the Philippine economy—rebounds. Currently, elevated consumer prices are squeezing disposable income, forcing households to prioritize savings over spending.

Unlike Pantheon Macroeconomics’ dovish stance, other observers hold a more hawkish tone even as the latest GDP outturn prompted downward revisions in their full-year growth assumptions.

Leading the hawkish camp is BMI, a Fitch Solutions company, which has significantly revised its outlook following the dismal first-quarter performance and the mounting spillover effects from the US-Iran military hostilities.

Despite the slowdown, BMI expects the BSP to prioritize the broad-based price pressures triggered by elevated energy costs over growth support.

BMI now expects the BSP to deliver a jumbo 50-basis-point (bp) hike in June—or possibly through an earlier off-cycle meeting—which would bring the policy rate to five percent, although the firm warned that the move could further weaken the already dampened consumption and investment outlook.

BMI lowered its 2026 growth forecast to 4.2 percent from 4.7 percent previously, with high prices likely constraining household consumption in the near term.

Dutch financial giant ING also remains in the hawkish camp, viewing the first-quarter miss as a signal of a much weaker-than-expected growth trajectory for 2026.”

Deepali Bhargava, ING regional head of research for Asia-Pacific, argued that the anemic GDP print “will deter the BSP from proceeding with a rate hike in June.” noting price stability as the BSP’s main focus.

Bank of the Philippine Islands (BPI) lead economist Emilio S. Neri, Jr. rounded out the hawkish force, arguing that the cost of inaction could be devastating.

“A strong monetary response to inflation may still be warranted despite the weak GDP growth,” Neri said, because persistent price pressures could become “more damaging to the economy if left insufficiently addressed.”