Deutsche Bank expects BSP to extend tightening cycle in the Philippines

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Deutsche Bank on BSP tightening

Highlights

Deutsche Bank expects Bangko Sentral ng Pilipinas to raise its policy rate by 25 basis points to 5.25% at the October 22 meeting amid rising inflation.
Headline inflation in the Philippines accelerates to 7.2% in September, pushing year-to-date average to 5.4%, staying above BSP’s 3% target for seven months.
BDO Capital forecasts the peso will remain volatile, ending 2024 between P60 and P62 per U.S. dollar, with record low P62.90 reached on October 8.

Inflation outlook drives October rate call

As reported by BusinessWorld, citing Deutsche Bank, its economists expect the Bangko Sentral ng Pilipinas to deliver a fourth straight rate increase this month as price pressures intensify. In a report issued Monday, the bank says the Philippine central bank is likely to raise its policy rate by 25 basis points to 5.25% at the Oct. 22 meeting.

Economist Junjie Huang says the bank brings forward its call for a 25-basis-point increase after an upside surprise in inflation. He says underlying inflation measures have strengthened while global oil prices rise again to about $100 per barrel in early October, from about $90 per barrel at the BSP’s last meeting in August.

The Monetary Board in August raises its benchmark rate by 25 basis points to 5% for a third straight meeting. BSP Governor Eli M. Remolona, Jr. says at the time that the move aims to contain inflation risks linked to super El Niño, wage increases and volatile global oil prices, while leaving the door open to further tightening if needed.

Headline inflation accelerates to 7.2% in September, a three-and-a-half-year high that matches this year’s peak first recorded in April. That pushes the year-to-date average to 5.4%, with inflation now staying above the central bank’s 3% goal for seven consecutive months.

Policy and market implications for the peso

Deutsche Bank also raises its inflation forecasts to 5.7% from 5.5% for this year and to 4.2% from 4% for 2027, citing an earlier-than-expected rise in food prices and part of the upside risk from El Niño. Even so, those projections remain below the BSP’s latest forecasts of 6.1% and 5.4%, respectively.

Huang says the Philippines’ real interest rate, at negative 2.2% in September, may remain the lowest among peer economies until the end of the first quarter of 2027. He adds that the BSP may still need a tighter policy stance to keep inflation expectations anchored, and says the benchmark rate could climb further to 5.5% later this year and into 2027 if key inflation risks materialize.

BDO Capital & Investment Corp. President Eduardo V. Francisco also says the BSP could extend its tightening cycle with a quarter-point increase this month to contain inflation risks and support the peso. He says a modest increase could help prevent the currency from weakening toward P64 per U.S. dollar while easing inflation pressures.

Francisco expects the peso to remain volatile before ending the year between P60 and P62 against the dollar. On Oct. 8, the peso closes at a record low of P62.90, and the currency remains under pressure as the Middle East war, which starts in February, adds to supply-side price risks for the import-dependent Philippine economy.

In our earlier article on Metrobank’s top rankings in Philippine bond market categories at The Asset Benchmark Research Awards 2026, we highlighted the bank’s strength in both peso-denominated fixed income and G3 bond trading. We also noted the individual recognitions within Metrobank’s trust and trading teams, underscoring its role in servicing institutional and retail investors across local and global-currency debt markets.

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