The Bangko Sentral ng Pilipinas (BSP) is likely to maintain its tightening bias despite inflation easing for three consecutive months, according to Emilio Neri Jr., lead economist at the Bank of the Philippine Islands (BPI).

In a commentary, Neri said the combination of weather disturbances, a prolonged Gulf conflict and potential further tightening by the US Federal Reserve remain significant upside risks for the local economy, despite headline inflation easing further to 6.2 percent in July.

“Despite the lower inflation print, risks remain tilted to the upside, and inflation is likely to stay elevated for the remainder of the year. While inflation may begin to moderate during the first half of 2027, the pace of easing could be gradual and inflation may remain above target for some time,” he said.

“The BSP may need to raise its policy rate further in response to these risks. Recent policy actions suggest that the central bank is attempting to balance the need to bring inflation under control while avoiding a sharp slowdown in economic activity, resulting in a gradual pace of tightening in recent months,” he said.

Headline inflation eased to 6.2 percent in July, marking its third consecutive month of decline. Neri said the breathing room came from a decline in global oil prices that preceded the renewed hostilities in the Middle East.

“Lower fuel costs contributed to a modest easing in transport inflation, with transport’s contribution to headline inflation declining slightly by 0.1 percentage point,” he said.

The economist noted that the BSP has had to juggle rising prices with slowing economic growth, which slumped to 2.3 percent in the second quarter as the lingering effects of the flood control scandal continued to play out.