BSP Expected to Keep Hawkish Stance as Inflation Risks Persist, Says Standard Chartered

The Bangko Sentral ng Pilipinas (BSP) is likely to maintain its hawkish monetary policy stance in the near term as upside risks to inflation remain elevated, according to a new analysis from Standard Chartered.

Standard Chartered’s Outlook on BSP Policy

In a research note published this week, Standard Chartered economists projected that the BSP will hold its benchmark interest rate steady at 6.50% through the first half of 2026, with any potential rate cuts delayed until inflation shows a sustained downward trajectory. The bank cited persistent pressure from food and energy prices, as well as the lingering effects of supply-side disruptions.

The BSP has kept its policy rate unchanged since October 2024, after a cumulative 450 basis points of hikes between 2022 and 2024. Governor Eli Remolona Jr. has repeatedly signaled that the central bank remains vigilant against second-round effects and is prepared to tighten further if needed.

Inflation Dynamics and Risks

Headline inflation in the Philippines eased to 3.4% in January 2026, within the BSP’s 2%–4% target range, but core inflation remains sticky at 3.8%. Standard Chartered noted that risks are tilted to the upside, particularly from potential increases in global oil prices, domestic transport fare adjustments, and wage pressures.

The bank’s analysis also highlighted that the BSP’s hawkish stance is partly a preemptive measure to anchor inflation expectations, especially as the Philippine economy continues to grow at a robust pace of around 6% annually.

Implications for Borrowers and Investors

For consumers and businesses, a prolonged hawkish BSP means borrowing costs will remain elevated. Mortgage rates, business loans, and credit card interest rates are likely to stay high, potentially dampening domestic demand in the short term. However, the central bank’s commitment to price stability may support the Philippine peso and attract foreign portfolio inflows, benefiting bond markets.

Standard Chartered also noted that the BSP’s cautious approach aligns with global central banks, including the US Federal Reserve, which has also signaled a slower pace of rate cuts. This synchronization reduces the risk of disruptive capital outflows from emerging markets like the Philippines.

Market Reaction and Forward Guidance

Following the report, the Philippine peso traded marginally stronger against the US dollar, while the benchmark Philippine Stock Exchange index edged lower as investors priced in a longer period of tight monetary conditions. Yields on 10-year government bonds rose by 5 basis points.

Market participants will closely watch the BSP’s next monetary policy meeting scheduled for March 27, 2026, for any shift in forward guidance. Most analysts expect no change in rates, but any dovish language could trigger a rally in bonds and equities.

Conclusion

Standard Chartered’s assessment reinforces the view that the BSP will remain data-dependent and cautious in easing policy. While inflation is gradually moderating, the central bank is unlikely to cut rates until it sees convincing evidence that price pressures are sustainably contained. For now, the hawkish stance appears firmly in place, shaping the financial landscape for borrowers, investors, and businesses across the Philippines.

FAQs

Q1: Why is the BSP expected to stay hawkish?
The BSP is expected to maintain a hawkish stance because inflation risks remain elevated due to potential supply shocks, global oil price volatility, and domestic demand pressures. Standard Chartered believes the central bank will prioritize price stability before considering rate cuts.

Q2: What does a hawkish BSP mean for borrowers?
A hawkish BSP means interest rates on loans—including mortgages, car loans, and business credit—will stay high. Borrowers may face higher monthly payments, and new loans may be more expensive until the central bank begins easing policy.

Q3: When could the BSP start cutting rates?
Standard Chartered projects that the BSP may begin cutting rates in the second half of 2026, provided that inflation consistently trends toward the lower end of the 2%–4% target range and global economic conditions remain stable.