Philippines inflation eases, but BSP rate hikes still Likely
At a Glance
The ING desk argues that despite a slight easing in Philippines headline inflation to 6.4% YoY in June, the acceleration in core inflation to 4.4% and sticky services/utility costs support the case for further BSP rate hikes. The data undershot market expectations, but the underlying persistence keeps the tightening bias intact. No consensus targets are available from our internal coverage for USD/PHP, and no high-impact events are scheduled in the next 30 days. The key takeaway is that rate hike expectations will keep the peso supported near-term.
Key Takeaways
- 01Philippines headline CPI eased to 6.4% YoY in June, below expectations, but core inflation accelerated to 4.4%.
- 02ING sees further BSP rate hikes as likely due to persistent underlying cost pressures, especially utilities and services.
- 03Transport disinflation provided temporary relief, but food price risks and core stickiness argue against a policy pivot.
- 04The peso is likely to remain supported in the near term as markets price in additional tightening.
Full Analysis
What the desk is arguing
The ING desk maintains that further BSP rate hikes remain likely even after headline inflation eased to 6.4% YoY in June from 6.8%. The moderation, driven by softer transport and non-rice food prices, masks accelerating core inflation to 4.4%, highlighting persistent underlying pressures. Per the full note , the desk rejects the alternative read that the peak has passed, citing sticky services and utility inflation along with food supply risks as reasons to keep tightening.
The key supporting evidence is the 0.3ppt acceleration in core inflation, which the desk views as more indicative of the trend. Transport inflation slowed sharply to 13% YoY on the back of a 12% drop in domestic fuel prices in June, but the broader slowdown is insufficient to shift the BSP’s hawkish stance. The desk emphasizes that food inflation, with its 38% weight in the CPI basket, remains elevated and supply risks persist.
Market Implications
USD/PHP should trade with a modest downside bias as the BSP is seen delivering at least one more 25bp hike. The key level to watch is the 56.00 support; a break below could accelerate losses towards 55.50. The next inflation print on August 3 will be the primary test.
From the original
Older quick take Quick take 04:54 Philippines inflation eases, but BSP rate hikes still Likely Philippines headline inflation eased to 6.4% YoY in June, driven by softer transport and food price pressures, but core inflation accelerated to 4.4%, highlighting persistent underlying
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Philippines’ central bank stays hawkish as inflation risks remain elevated
The desk interprets the recent actions of the Bangko Sentral ng Pilipinas (BSP) as a firm commitment to maintaining a hawkish stance in response to persistent inflation risks driven by external factors, including the El Niño phenomenon. Per the full note from ing-think, the BSP raised rates by 25 basis points to 5.0% and adjusted its 2027 inflation forecast upwards to 5.4%, reflecting concerns over escalating food prices and significant wage increases. Overall market consensus is built around the notion that additional rate hikes may follow late in 2026, aligning with our expectations of a cautious approach to inflation management. In this context, the absence of immediate calendar events means the market reaction will hinge on external inflation data moving forward.