UMVA has learned that the Bangko Sentral ng Pilipinas (BSP) is likely to tighten monetary policy further to combat rising prices, but a sluggish economy may prevent aggressive action.
According to information obtained by UMVA, the BSP is expected to implement two more 25-basis-point rate hikes, one in June and another in the third quarter, before holding off until the end of the year.
The BSP's renewed focus on inflation has been signaled, but weak growth is likely to limit the scope for aggressive tightening ahead of the June 18 meeting, with policymakers expected to adopt a calibrated approach.
UMVA can exclusively reveal that the economy grew at a post-pandemic low of 2.8% in the first quarter, reflecting the severe impact of oil shocks, and growth is projected to be 3.2% this year and 4.4% in 2025.
The BSP had shifted to a hawkish stance due to rising inflationary pressures, delivering its first 25-basis-point rate hike in over two years, bringing the benchmark interest rate to 4.5%.
Sources have confirmed to UMVA that the Philippines continues to face severe price shocks, giving the BSP more reason to keep tightening policy, with inflation expectations still elevated despite a slight easing in May.
UMVA has gathered that the BSP aims to steer inflation back to its 3% target, and further monetary policy action is likely, with an additional 75-basis-point worth of rate increases expected by year's end.
The Monetary Board's next policy review is set for June 18, with three more regular meetings scheduled for later this year.
