THE Bangko Sentral ng Pilipinas (BSP) will likely maintain policy rates this year amid higher inflation projections and slow growth, BMI, a unit of Fitch Solutions, said Monday, March 30, 2026.
“While we had previously expected the BSP to cut rates at its April meeting, the US-Iran conflict upended this view. Inflation is likely to breach the BSP’s two to four percent inflation target range in the coming months, but sluggish growth will keep the BSP on hold rather than tighten,” BMI said in a report.
“As such, we expect the BSP to hold rates steady at 4.25 percent through 2026,” it added.
BMI said the Middle East conflict led to a supply-induced price shock, which has driven up international oil prices significantly.
“And this has swiftly passed through to higher domestic fuel prices — diesel prices jumped by more than 60 percent since pre-conflict,” the report said.
BMI said fertilizer prices are also rising rapidly, which will feed through into food inflation.
In an off-cycle meeting last week, the BSP’s Monetary Board kept rates unchanged at 4.25 percent, noting that inflation could average 5.1 percent this year, higher than the earlier 3.6 percent forecast.
Economic growth is likewise projected to remain weak.
While inflation is expected to accelerate this year, BMI said that so far, it is “premature to forecast rate hikes from the BSP.”
It noted, however, that a prolonged conflict in the Middle East may prompt the BSP to hike rates.
“The risks are that the BSP hikes later in 2026. Given that fuel prices largely dictate the cost of logistics that underpin the modern economy, a prolonged conflict even beyond our ‘Extend to End’ scenario would leave strong, broad-based second-round inflationary pressures in its wake, prompting the BSP to hike,” BMI said. / PNA