BSP weighs faster tightening as inflation persists

From AB Capital's The Opening Bell: Three Moves

Event

BSP Governor Remolona said the Monetary Board is considering another rate hike before the June 18 meeting, after April inflation surged to 7.2%. The BSP sees inflation averaging 6.3% in 2026 and remaining above target into 2027.

View

In our view, the BSP is shifting toward a more aggressive stance as the supply shock becomes persistent. The concern is no longer only oil prices, but faster pass-through into transport, fertilizer, rice, utilities, and inflation for lower-income households.

Catalyst

Key triggers are May inflation, peso stability, and second-round effects. If inflation remains above 6% and the peso weakens toward P62.0 in a disorderly manner, we think the BSP could deliver at least 75bp additional hikes this year.

Action

We think markets should price in higher-for-longer rates. Favor banks with strong deposit franchises and defensives with pricing power. Remain cautious on property, discretionary consumption, and leveraged names, where higher funding costs and weaker real incomes could pressure earnings.

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