MANILA — BMI, a unit of Fitch Solutions, expects the Bangko Sentral ng Pilipinas (BSP) to raise policy rates by another 25 basis points this year as inflation risks persist.

“BSP was noticeably more hawkish and we now expect it to hike once more by 25 bps to 4.75 (percent), most likely at the June meeting,” BMI said in a report released Friday.

The BSP’s Monetary Board on Thursday increased policy rates by 25 basis points, citing projections that inflation could exceed the government’s target for 2026 and 2027. The central bank noted that higher oil prices stemming from tensions in the Middle East are expected to push up transportation and food costs.

BMI said the likelihood of another rate increase is mainly driven by the inflation outlook.

It projected headline inflation to stay above 4 percent in the coming months, averaging 4.3 percent for the year.

Data showed that headline inflation climbed to 4.1 percent in March from 2.4 percent in February, largely due to faster price increases in transport and food items.

“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.

The report also pointed out that as of April 20, gasoline and diesel prices had surged by 57.6 percent and 118.4 percent, respectively, from pre-conflict levels.

“Acting sooner would help to re-anchor inflation expectations before broader price pressures become more entrenched,” BMI said.

“Beyond June, we expect the BSP to pause for the rest of the year. Two consecutive 25 bps rate hikes should suffice for now, given the increasingly fragile growth backdrop.”