The Bangko Sentral ng Pilipinas (BSP) is expected to maintain its hawkish monetary policy stance, according to international lenders, though economists remain divided on how many additional interest-rate increases will be needed to combat persistent supply-side inflation.

Japanese financial institutions MUFG Bank Ltd. and Nomura Holdings Inc., along with Wall Street giant Citigroup Inc., are projecting a cumulative 50 basis points (bps) of rate hikes in the coming months. The moves would lift the benchmark borrowing rate to 5.25 percent from the 4.75 percent level set during the June policy meeting.

“We continue to see the BSP hiking rates twice more this year for a total of 50 bps, with the rate at 5.25 percent by end-2026,” MUFG senior currency analyst Michael Wan wrote in a June 19 commentary.

Wan noted that local monetary authorities remain in tightening mode even after raising the policy rate twice since the United States–Iran war shocked domestic oil prices and the broader economy. He believes the sustained hawkishness of the BSP will help anchor the peso against the US dollar over the year ahead.

“We think the Philippine peso should be supported by a narrower trade deficit given lower oil prices and the US–Iran deal, the hawkishness from the BSP, and our expectation for further BSP rate hikes,” Wan said.

Euben Paracuelles and Nabila Amani, Nomura economists for Asia, also noted that the central bank’s tone was “decidedly hawkish.” These concerns are reflected in the BSP raising its inflation assumptions for 2026 and 2027 to 6.4 percent and 4.5 percent, respectively—both overshooting the 4.0 percent target ceiling.

This suggests that, despite the cooling situation in the Middle East, the BSP remains focused on domestic risks. BSP Governor Eli M. Remolona Jr. stated that the latest policy move still has a “pre-emptive” component designed to address potential shocks.

Core inflation, which breached the 4.0 percent ceiling for the first time since December 2023, is expected to remain on an “upward trajectory until the fourth quarter” of the year, Nomura said. According to Paracuelles and Amani, the BSP will continue to view rising core inflation as “a risk of a buildup in second-round effects, requiring more monetary tightening.”

Similarly, Citi pointed out that the BSP remains concerned about broader inflationary pressures. “The BSP downplayed the May headline inflation reduction, citing that core inflation actually increased and may stay above four percent throughout the year,” the lender noted.

Singapore-based Oversea-Chinese Banking Corp. Ltd. (OCBC) holds the most hawkish projection, pricing in a quarter-point rate increase at each of the upcoming policy meetings in August, October, and December. This would raise the policy rate to 5.5 percent by the end of the year.

OCBC economists for ASEAN stressed that while global prices are easing, domestic factors will likely sustain a prolonged period of elevated costs for consumers.

“It could still take until late [2026] to reach 5.5 percent levels. This implies an asymmetric path to lower consumer price index (CPI) compared to the sharper increases seen in April and May,” OCBC said. Inflation peaked at 7.2 percent in April before easing to 6.8 percent in May.

In contrast, Singapore-based UOB and DBS Bank Ltd. maintain a less hawkish position, pointing to muted economic growth this year that may require additional stimulus to complement the modest pick-up in government spending. Domestic gross domestic product (GDP) growth clocked in at a five-year low of 2.8 percent in the first quarter of 2026.

“While the latest Monetary Policy Statement (MPS) retains a tightening bias, recent developments suggest that the inflation trajectory may turn more moderate than earlier anticipated amid softening economic growth momentum,” said UOB senior economist Julia Goh and economist Loke Siew Ting.

However, UOB also recognized that the central bank's inflation assumptions reflect an entrenched environment where the 4.0 percent target cap continues to be breached. “This implies a more prolonged breach of the BSP’s four percent upper target band... strengthening the case for continued policy restraint,” UOB added.

Furthermore, MUFG and Nomura cited a possible super El Niño as a major threat to stabilizing consumer prices, noting it could directly impact food prices—particularly rice, the country’s staple grain.

Citi noted that the primary downside risk to its hawkish forecasts is a policy hold, pointing to the declining purchasing power of Filipino consumers. It added that falling production costs may eventually allow firms to reduce prices or provide discounts, which could help slow inflation.