Crypto & Forex April 24, 2026 0 Comments

Why the BSP’s New Hiking Cycle Could Upend PHP Markets – What Every Investor Needs to Know Now

So, the Bangko Sentral ng Pilipinas (BSP) kicked off its new tightening cycle, nudging the policy rate up by 25 basis points to 4.50%—its first rate hike since September 2023. You’d think that kind of move would give the peso a leg up, right? But nope—despite the hawkish tone and climbing inflation forecasts, the peso’s been lagging behind its regional buddies, mainly because the Philippines is sweating over Middle East energy prices after the Iran war. Inflation’s creeping up to 4.1% year-over-year, and the BSP is sharpening its focus on price stability, even tossing around the idea of a 50bp hike next time. Meanwhile, growth projections are being trimmed, and the economy’s bracing for some rattles, thanks to supply chain squeezes and political headwinds. Makes you wonder — can monetary tightening really lift a currency tied so tightly to global energy shocks? Let’s dig into the nitty-gritty of what’s at stake here. LEARN MORE

Commerzbank highlights that BSP raised its policy rate by 25bp to 4.50%, signalling the start of a new tightening cycle to anchor inflation expectations. Despite a hawkish tone and higher inflation forecasts, the Peso underperforming regional peers since the Iran war as the Philippines remains highly exposed to Middle East energy prices.

Rate hike fails to lift weak currency

“The Bangko Sentral ng Pilipinas (BSP) raised the target reverse repo rate by 25bp to 4.50%. The market consensus was split 50-50 on a rate hike in a Bloomberg poll. It was BSP’s first rate hike since September 2023. The decision was aimed at anchoring inflation expectations and containing second-order inflationary effects. Historically, BSP has had a low tolerance for inflationary pressures. It tightened policy in 2018 and 2022 as headline CPI rose above BSP’s inflation target range of 2-4%. Headline CPI climbed to 4.1% yoy in March 2026.”

“BSP Governor Remolona emphasized the central bank’s focus on price stability and revealed that 50bp hike was considered. He stated that this is the start of a new rate hike cycle. Governor Remolona noted that “Once we start raising the policy rate, we’re likely to do it again”. BSP downplayed the possible drag on growth from higher policy rates, suggesting that the current monetary policy stance “will still accommodate economic recovery over the medium term”.”

“On growth, BSP lowered its full-year projection to 4.3% from 4.6% previously, below the government’s target range of 5-6%. BSP stated that they are confident that fiscal policy is sufficient to support growth. Nonetheless, risks are tilted to the downside amid supply chain disruptions from the Middle East conflict. Support from fiscal policies will be limited by slower public spending disbursements and weaker economic sentiment following several large-scale graft allegations concerning several politicians.”

“Price pressures are expected to be more widespread in the coming months primarily through the transport costs and fertilizer price channels. As such, higher global commodity prices could spill over to goods and services in the core CPI basket, raising the risk of second-order impacts. BSP is also monitoring inflation expectations to ensure that the supply-side inflationary pressures do not distort wage-setting dynamics, keeping supply-side price pressures sticky.”

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)