The Bangko Sentral ng Pilipinas (BSP) could raise interest rates further in the fourth quarter unless underlying price pressures show a sustained slowing trend through the end of the year, according to ING Groep NV.

Deepali Bhargava, ING regional head of research for Asia-Pacific (APAC), said the Dutch lender expects the central bank’s Monetary Board to deliver another 25-basis-point increase in key borrowing costs during the final quarter as persistent risks keep the policy outlook hawkish.

“We continue to expect another 25 basis points (bps) rate hike in the fourth quarter of 2026 as policymakers remain focused on inflation risks until core inflation shows clear signs of moderation,” Bhargava said.

ING’s outlook comes on the heels of the BSP’s third consecutive quarter-point hike, which brought the benchmark rate to five percent from 4.75 percent.

“Uncertainty surrounding the severity and duration of El Niño, the persistence of higher oil prices, and the transmission of recent wage increases is unlikely to be fully resolved before then,” Bhargava said.

“More importantly, while these risks could keep headline inflation volatile over the coming months, we believe the BSP will be looking for convincing evidence that core inflation is decelerating before calling a peak in rates,” she added.

Core inflation stood at 4.2 percent in July, easing from a peak of 4.4 percent in June. However, this remains above the four percent target for both headline and core prints.

According to ING, core disinflation would provide greater confidence that second-round effects from food, energy, and wages are fading.

“Until that happens, the BSP is likely to maintain a hawkish bias and remain focused on ensuring that inflation expectations stay firmly anchored,” Bhargava said.

During its latest policy meeting, the BSP tweaked its 2026 average inflation forecast lower to 6.1 percent from 6.4 percent.

For 2027, however, it raised the forecast to 5.4 percent from 4.5 percent, keeping it well above the BSP’s two percent to four percent target range. Much of the upside risk to consumer prices stems from the potential implementation of a record-high wage hike, the scale of which caught the central bank off guard.

Headline inflation is expected to settle near the three percent target by 2028, specifically at 3.3 percent.

Despite disappointing economic growth, BSP Governor Eli M. Remolona Jr. argued that “the current monetary policy stance is not constraining activity,” pointing to a real policy rate of around 1.75 percent.

He asserted that a five percent benchmark rate is “not that high when you consider inflation expectations.”

ING, however, warned that narrowing interest rate differentials between the Philippines and the United States (US) could pressure the peso.

“This could place additional pressure on the peso, particularly at a time when US Treasury yields have risen sharply,” Bhargava noted, stressing that “the BSP is likely to remain cautious about pausing rate hikes prematurely.”

While ING remains hawkish, Singapore-based United Overseas Bank (UOB) believes the hiking cycle has ended.

UOB senior economist Julia Goh and economist Loke Siew Ting noted that interest rates are approaching “sufficiently restrictive territory,” adding that language shifts imply the central bank is not committing to another move. The BSP hopes another hike will not be needed.

Rather than signaling a prolonged tightening phase, the recent hike was a preemptive action to anchor expectations. Thus, UOB expects the BSP “to stay on hold” following its latest move, keeping the rate at 5 percent through 2027.

Meanwhile, Citi sees a higher likelihood of central bank action, warning that “the probability of inflation surprises materializing ahead of the Dec. 17 meeting...is more significant.” This scenario would require another quarter-point hike at the year's final policy meeting to tame inflation.

Citi does not, however, expect continued monetary tightening into next year, implying the terminal rate could peak and hold at 5.25 percent.