Frankfurt-based Deutsche Bank AG is expecting the Bangko Sentral ng Pilipinas (BSP) to further raise key borrowing costs twice more to reach 5.25 percent, standing firmly by its assumption that the hiking cycle is not yet over and that the looming El Niño further threatens price spikes.

Deutsche Bank Research wrote on June 19 that while the BSP adopted a less hawkish approach to addressing supply-driven price pressures, the German lender is keeping the unmet quarter-point hike in its forecast and penciling it in for later policy meetings.

Last week, the policy-setting Monetary Board (MB) opted to raise the key policy rate by 25 basis points (bps) to 4.75 percent from 4.5 percent previously, as inflation pressures remain elevated. Price stability is the primary mandate of the BSP.

BSP Governor Eli M. Remolona Jr. noted that the central bank, as of now, is not overly concerned about the risk of inflation expectations becoming de-anchored. This is likely due to falling oil prices, which prompted a measured hike rather than a larger, more aggressive tightening.

“We are moving the unmet 25-bp hike to October, as the BSP’s above-tolerance inflation outlook for both 2026 and 2027 suggests that its hiking cycle is not yet over,” Deutsche Bank Research said, adding that further hikes from the current 4.75 percent are expected in the next two consecutive policy meetings in August and October.

According to the German lender, the looming El Niño brings a “significant upside risk to overall inflation and thus our BSP outlook,” compelling local monetary authorities to sustain their tightening cycle. Remolona said the BSP still has “a lot of space to tighten.”

Moody’s Analytics likewise pointed out the lingering price pressures, which the think tank believes could still be felt in the coming months.

“With headline inflation above target and likely to remain elevated in the months ahead, the BSP may need to keep rates higher for longer and could yet deliver further tightening if price pressures fail to ease,” Moody’s Analytics said last June 19.

Headline inflation peaked at 7.2 percent in April before easing to 6.8 percent in May. Despite this cooling trend, elevated global oil costs continue to spill over into domestic consumer prices.

During the June policy meeting, the BSP raised its inflation projections for 2026 and 2027 to 6.4 percent and 4.5 percent, respectively, from its previous forecasts of 6.3 percent and 4.3 percent.

For think tank Capital Economics, the BSP is now left with one quarter-point hike in the third quarter of the year, bringing the benchmark rate to five percent. The BSP is scheduled to hold its next monetary policy meeting in August.

A June 19 report showed that Capital Economics expects the BSP to conclude the tightening cycle at five percent this year before pivoting back to easing in 2027, returning the benchmark rate to 4.5 percent. The think tank’s relatively dovish view reflects concerns over lackluster economic growth, which it expects to come in below target at 2.9 percent this year and 4.5 percent in 2027.