More rate hikes remain an option for the Bangko Sentral ng Pilipinas (BSP) if the impact of the Middle East situation worsens throughout the year, according to BSP Governor Eli M. Remolona Jr.

In a Friday television interview, the central bank chief said the BSP remains observant and prepared to raise rates as needed to keep prices stable.

“We stay vigilant and we’ll do as many hikes as necessary. We’re being proactive — we’re staying ahead of the curve,” he said. “Normally, it would be a succession of small rate hikes, but it will depend on how large the spillover effects are, so we just have to watch the data and measure expectations.”

The BSP’s Monetary Board — chaired by Remolona — recently raised the Target Reverse Repurchase (RRP) rate by 25 basis points to 4.5 percent, reversing the 25-basis-point cut implemented in February. The move was driven by a deteriorating inflation outlook and spillover effects from rising energy and fertilizer prices.

“Headline inflation is now projected to breach our tolerance range not just this year, but in 2027 as well. Inflation expectations are rising further, increasing the risk that they will become unanchored,” Remolona said during Thursday’s monetary policy briefing.

The RRP serves as the BSP’s primary monetary policy tool, acting as the benchmark for overnight lending to banks. A lower RRP increases liquidity in the economy, supporting consumption — the main driver of Philippine growth — and investment. However, it can also generate inflationary pressures, which had remained manageable prior to the conflict’s escalation and allowed the BSP to cut rates in December 2025 and February 2026.

Inflation surged to 4.1 percent in March, up 1.7 percentage points from February and 2.3 points higher than in December, driven largely by higher fuel and transport costs following the escalation of the conflict.

“It was a big jump this month, largely because of the oil price shock. We can’t do very much about the shock itself. Normally, if it’s a small shock, we would just look through it —but this one was more than modest,” Remolona said.

He added that under a more severe scenario, a 50-basis-point hike had been considered, noting it was a close call whether to reverse both the December and February rate cuts.

“That part was close. What wasn’t close was the decision of whether to hike or not — but how much to hike was a close call,” he said.

The BSP now expects inflation to exceed its 2 to 4 percent target range over the next two years, with projections reaching 6.3 percent in 2026 as energy-driven spillover effects spread to other goods and services. Remolona reiterated that any further rate hikes would depend on how significant these broader price pressures become.

“Normally, it would be a succession of small rate hikes, but it will depend on how big the spillover effects are, so we just have to watch the data and measure expectations.”

Meanwhile, international analytics firm BMI projects the BSP to hike the RRP by another 25 basis points to 4.75 percent in its next monetary policy meeting in June, citing the central bank’s more “hawkish” stance.

“Further inflationary pressures lie ahead. Unlike regional peers, such as Thailand, Indonesia and Malaysia, the Philippines does not typically absorb higher energy costs as fiscal constraints hinder broad-based price caps, so increases in global energy prices pass through relatively quickly,” BMI said in its report.

“Acting sooner would help to re-anchor inflation expectations before broader price pressures become more entrenched,” the firm added, noting it expects the BSP to pause following a potential June cut amid the “increasingly fragile growth backdrop.”