Singapore-based Oversea-Chinese Banking Corp. Ltd. (OCBC) holds one of the most hawkish outlooks on local monetary policy, pricing in a 25-basis-point (bp) rate hike at each of the remaining policy meetings in 2026 on expectations that inflation will stay elevated.

OCBC Group Research expects headline inflation to average 5.8 percent in 2026—a sharp jump from the 1.7 percent average seen in 2025—and projects price growth to hover above 6.0 percent for the rest of the year.

The elevated inflation rate reflects “broadening price pressures and potentially second-round effects,” OCBC noted.

“This will keep the BSP vigilant of price pressures,” the lender said. “More fundamentally, consumer, business, and investor confidence remains low following a prolonged period of weaker growth, higher inflation, limited reforms, heightened domestic political uncertainties, and external geopolitical risks.”

Consequently, the Bangko Sentral ng Pilipinas (BSP) is expected to maintain a restrictive monetary policy stance throughout the year. Even as the central bank signaled only a “small” chance of aggressive tightening, OCBC projects further hikes from the current benchmark rate of 4.75 percent.

“Our base case remains for one 25 bp hike at each of the remaining three meetings, taking the policy rate to 5.5 percent by end-2026,” OCBC said. The BSP has already raised key interest rates twice since Middle East hostilities erupted in late February.

The Monetary Board will hold its fourth policy meeting of the year on Aug. 27, with subsequent sessions scheduled for Oct. 22 and Dec. 17.

The BSP reiterated that it will closely monitor recent developments and their potential impact on prices and output, adding that it stands “prepared to take further monetary action as needed” to steer inflation back to the government’s target band.

Meanwhile, Singapore-based United Overseas Bank (UOB) also maintains a hawkish tone ahead of the August policy meeting, forecasting a quarter-point hike to 5.0 percent despite July's easing inflation print.

Headline inflation slowed to a three-month low of 6.2 percent in July from 6.4 percent in June and a peak of 7.2 percent in April. Core inflation, which excludes volatile food and energy items, likewise continued to ease.

However, UOB senior economist Julia Goh and economist Loke Siew Ting highlighted that both headline and core inflation remain well above the central bank’s 2.0 to 4.0 percent target range.

At the same time, UOB recognized the easing of offshore geopolitical risks, particularly between the United States and Iran.

“Easing external risks, particularly reduced concerns over Middle East tensions and energy supply disruptions, could provide scope for the BSP to pause further tightening later in the year, amid signs of subdued domestic demand and persistent growth softness,” UOB said.

UOB forecasts second-quarter gross domestic product (GDP) growth at 2.0 percent—slower than the post-pandemic low of 2.8 percent recorded in the first quarter.

For full-year 2026, OCBC expects the Philippine economy to grow by 3.8 percent, citing price pressures and limited fiscal support weighing on domestic demand. If realized, this expansion would settle within the government's revised target range of 3.5 to 4.5 percent.

Slower economic momentum typically calls for a dovish monetary policy—lowering interest rates to bolster borrowing and private consumption. The BSP last maintained a dovish stance before hostilities in the Middle East flared up.