Philippine central bank watch A tightrope walker’s nightmare?

Research evidence excerpt

Philippine central bank watch A tightrope walker’s nightmare?

11 June 2026

Philippine central bank watch EconomicsPhilippines

A tightrope walker’s nightmare?

◆ Risks are diverging: private demand remains shaky, while Aris Dacanay

inflation is still running hot… Senior ASEAN Economist

The Hongkong and Shanghai Banking Corporation Limited

aris.dacanay@hsbc.com.hk

◆ … but inflation risks dominate, reinforcing the urgent need to +852 3945 1247

manage FX-driven inflation

◆ Given the BSP’s price-stability mandate, we expect a 50bp

hike to 5.00% when the Monetary Board meets on 18 June

Like an acrobat that balances on a tightrope, the Bangko Sentral ng Pilipinas (BSP) is in a

tough but delicate balancing act. Inflation, albeit slightly easing last month, is still running

hot while the economy’s growth is well below its potential. Monetary policy has its trade-

offs, so the ‘monetary tightrope walker’ must assess where the risks are heavier to know

which side to lean towards and successfully make it to the other end of the tightrope.

Here, we think that risks are tilted towards inflation more than growth – or at least when it

comes to the risks that the BSP has control over. Like Bank Indonesia in May, we expect

the BSP to draw out a jumbo 50bp rate hike next week, bringing its policy rate to 5.00%.

Yes, headline CPI in May surprised to the downside, but the matter of fact remains the

same: inflation will likely continue to accelerate (Philippine CPI, 5 June 2026). Inflation

eased because oil prices eased. Food prices were then quick to adjust as transportation

costs became less cumbersome. However, all these are temporary in nature and subject

to the vagaries of the turmoil in the Middle East. Furthermore, we think price pressures on

food will also increase further.