The Bangko Sentral ng Pilipinas (BSP) is facing intensifying pressure to aggressively tighten monetary policy, with private-sector economists predicting up to 175 basis points in interest-rate hikes this year as geopolitical conflict and severe weather threaten to upend the inflation outlook.

A June survey of 23 private analysts showed that nearly all expect the central bank to lift its key borrowing cost within a range of 25 to 175 basis points in 2026, before potentially easing policy settings in 2027, according to the BSP’s monetary policy report published Tuesday.

If policymakers implement the maximum forecast tightening, it would drive the benchmark target reverse repurchase rate to a peak of six percent from the current 4.75 percent.

The hawkish turn among analysts follows a significant deterioration in the country’s consumer-price outlook. The BSP projected headline inflation to average an above-target 6.4 percent for the year, far outpacing the government’s official tolerance band of two percent to four percent.

While consumer price growth had previously recorded consecutive declines from a peak of 7.2 percent in April, year-to-date headline inflation still averages an elevated 4.8 percent.

Since the United States-Iran conflict flared up more than four months ago, disrupting global supply chains and pushing commodities higher, the BSP has already implemented a cumulative 50-basis-point hike in the benchmark rate to its current 4.75 percent level.

According to the report, the shift in the policy stance is a preemptive move against a rapidly changing price environment. The central bank noted that broadening price pressures require a stronger monetary policy response, explaining that supply-side forces are causing second-round effects to spread faster than anticipated.

Per a “high-inflation” alternative scenario outlined by the BSP, the ongoing Middle East conflict is identified as a primary risk, potentially driving global oil prices to $120 per barrel by the fourth quarter of 2026. Domestically, the threat is compounded by a predicted “super El Niño” episode, which the BSP warns could increase domestic rice prices by 8.5 percent and international rice prices by an additional 17.5 percent.

Under this high-inflation scenario, the report said headline inflation would remain above the 3 percent target over the medium term, suggesting that the central bank may need to adopt a tighter monetary policy stance to contain persistent cost-driven inflationary pressures.

Private analysts have mirrored this hawkish sentiment, with June survey results showing that mean inflation forecasts for the next one to two years remain above 4 percent, aligning with the BSP’s revised assumptions. This lack of confidence in a near-term return to target has prompted the BSP to emphasize its commitment to price stability, even as domestic economic activity moderated to 2.8 percent in the first quarter of 2026.

Despite the softening of near-term growth, the BSP maintains that tightening the monetary policy stance is needed to keep inflation expectations anchored and prevent higher inflation from becoming entrenched. Further, the central bank signaled its readiness to act should the high-risk scenario materialize, assuring that it is prepared to take further monetary policy actions to ensure that inflation returns to target.