The Bangko Sentral ng Pilipinas (BSP) may shift to a more neutral stance as inflationary pressures ease and the peso strengthens, according to Manulife Investment Management.
Lower crude oil prices could give the BSP the green light to adopt a more neutral stance, reducing the need for aggressive interest rate hikes. Manulife Investment Management Head of Asia Fixed Income Murray Collis said that if oil prices stabilize, it would give the BSP more ability to move to a more neutral stance.
Steady oil prices would also allow the BSP to slow down its tightening cycle, according to Manulife Investment Management Head of Asian Equities June Chua. This could lead to a near-term rally in the Philippines, as there would be less need for the BSP to hike interest rates aggressively.
The Monetary Board has raised benchmark borrowing costs by a total of 50 basis points since April to curb inflation and keep prices anchored. Despite this, core inflation remains strong, spiking to a 31-month high.
US interest rates are also expected to influence the BSP's policy path, as Manulife Investment Management expects the Federal Reserve to move gradually following the appointment of its new chairman. The firm expects oil prices and Fed policy to remain key drivers for many markets, including the Philippines.
Manulife Investment Management sees risks in the consumer and financial sectors in the Philippines due to political noise, further depreciation of the peso, and inflationary pressures stemming from El Niño and recent wage hikes. The peso weakened by 11.1 centavos to close at P61.71 against the dollar on Tuesday, its weakest close since June 3.
The peso has declined by 4.73% from its P58.79 finish on December 29, 2025. This decline has raised concerns about the country's economic stability and the BSP's ability to maintain price stability.
