OCBC strategists Sim Moh Siong and Christopher Wong note the Philippine central bank’s Bangko Sentral ng Pilipinas (BSP) hike of 25 basis points to 4.5% and the forecast that further increases are possible as inflation forecasts are revised upwards and second-round effects emerge. While this reduces the risk of the BSP falling behind and is relatively favorable for the Philippine Peso (PHP), the peso remains vulnerable to imported energy shocks and the uncertain dynamics of the US-Iran ceasefire.

Higher rates and energy sensitivity

“Further increases cannot be ruled out. The BSP increased interest rates by 25 basis points to 4.5% at its last MPC meeting (April 23). The Council now sees a greater risk of de-anchoring of inflation expectations due to higher oil and fertilizer prices, which are already weighing on domestic fuel and food costs, and core inflation continues to rise.”

“Governor Remolona said, “once we start raising interest rates, we will probably raise them again,” and also noted that a 50 basis point change was discussed. This suggests that the BSP is no longer just reacting to an external price shock, but is becoming increasingly concerned about the broader second-round impacts. Nevertheless, the 25 basis point raise was still described as measured and the Council assessed that it would “continue to take into account the economic recovery over the medium term”.

“For PHP, the message is relatively positive as it reduces the risk of BSP falling behind the curve. However, currency developments may continue to be limited by the Philippines’ vulnerability to imported energy shocks and the broader risk backdrop.”

“Until we get clarity on the ceasefire agreement, the PHP may have to bear the brunt of the strike.”

“Risk has moved slightly higher. Resistance at 60.83 (previous all-time high). Support at 60.15 (21 DMA), 60 levels (23.6% Fibo retracement from 2026 low to high).”

(This article was created with the support of an artificial intelligence tool and has been reviewed by an editor.)