PHP: BSP tightening supports Peso but risks linger – OCBC

OCBC strategists Sim Moh Siong and Christopher Wong note the central bank of Philippines Bangko Sentral ng Pilipinas' (BSP) 25bp hike to 4.5% and guidance that further increases are possible as inflation forecasts are revised higher and second-round effects emerge. While this reduces the risk of BSP falling behind the curve and is relatively supportive for Philippine Peso (PHP), the Peso remains vulnerable to imported energy shocks and uncertain US‑Iran ceasefire dynamics.

Higher rates versus energy vulnerability

"More hikes not ruled out. BSP hiked policy rate by 25bp to 4.5% at its last MPC meeting (23 Apr). The Board now sees a greater risk of inflation expectations becoming de-anchored, with higher oil and fertiliser prices already feeding into domestic fuel and food costs and core inflation still edging higher."

"Governor Remolona said “once we start raising the policy rate, we’re likely to raise it again,” and also noted that a 50bp move was discussed. This suggests BSP is no longer just reacting to an external price shock but is becoming more concerned about broader second-round effects. Nonetheless, the 25bp hike was still framed as measured, with the Board judging that it will “still accommodate economic recovery over the medium term”."

"For PHP, the message is supportive on a relative basis because it reduces the risk that BSP falls behind the curve. But the FX follow-through may still be tempered by the Philippines’ vulnerability to imported energy shocks and the broader risk backdrop."

"Until we get some clarity on the ceasefire agreement, PHP may have to bear the brunt of the hit."

"Risks somewhat skewed to the upside. Resistance at 60.83 (previous all-time high). Support at 60.15 (21 DMA), 60 levels (23.6% fibo retracement of 2026 low to high)."

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