Indonesia, Philippines set to hike rates as caution prevails: Bloomberg survey

Published Thu, Jun 18, 2026 · 11:33 AM

TWO of the region’s central banks are poised to tighten monetary policy further, staying on guard in case inflation and currency risks persist despite a potential de-escalation of the Middle East conflict.

Bank Indonesia and the Bangko Sentral ng Pilipinas are both expected to raise their policy rates by a quarter-point each on Thursday (Jun 18), according to a majority of economists surveyed by Bloomberg. 

Both economies have been hit by the steep increase in global oil prices, as well as domestic political instability, which has made their currencies among the worst performers in Asia since the outbreak of the war.

The calculus for Asia’s policymakers has abruptly shifted in a matter of days, and the US and Iran presidents have on Wednesday (Jun 17) signed an interim agreement to end their war. While oil prices have since declined, questions remain over how long the ceasefire could hold and how soon global energy supplies could return to normal.

“The deal will make the external backdrop more favourable but the fundamental risk factors have not changed,” said OCBC economist Lavanya Venkateswaran. Both central banks will likely remain hawkish in their messaging, signalling vigilance on price pressures in the Philippines and rupiah stability in Indonesia, she said.

Even if the peace deal sticks, Asian central banks may need to push on with their tightening cycles, according to HSBC Holdings economist Frederic Neumann.

“Rate hikes in Asia were always more than just about energy,” he said. “Food prices risk pushing higher over the coming months – a delayed reaction to costly fertiliser during the planting season – and broader supply chain pressures are still rippling through the system, including spillovers from the red-hot AI hardware sector.”

Adding to the complexity is the potential for future rate hikes in the US, which could further pull portfolio flows away from emerging markets like Indonesia and the Philippines.

Overnight, the US Federal Reserve stood pat in the first decision under Kevin Warsh, who vowed to curb inflation. Traders now price in two hikes by April.

Indonesia

Bank Indonesia will likely raise its benchmark BI-Rate by 25 basis points to 5.75 per cent, according to 25 of 40 economists in a Bloomberg survey. Two predicted a 50-basis point increase to 6 per cent, while 13 see a pause.

After delivering an unscheduled 25-basis point hike on Jun 9, policymakers may want to reinforce their commitment to stabilise the rupiah and restore investor confidence after months of market turmoil. 

Half of the 12 respondents in a separate Bloomberg survey said the move would only be temporarily effective in stabilising the rupiah, which has slumped nearly 6 per cent in 2026.

Fiscal discipline was the most-cited risk facing South-east Asia’s largest economy over the next six months, followed by currency weakness and slower domestic growth. Economists also repeatedly cited the need for policy credibility as the most important issue for investors.

“Policy credibility: rupiah stability, fiscal discipline, and Bank Indonesia independence, supported by predictable communication and consistent reform execution,” said Josua Pardede, chief economist at PT Bank Permata.

Under the presidency of Prabowo Subianto, Indonesia has swiftly fallen from an emerging-market darling to a global laggard. The ex-general has unnerved investors with his costly campaign promises, as well as erratic policies including the centralisation of Indonesia’s strategic commodity exports under a state body.

The central bank has stepped up efforts to support the currency and lure capital inflows. Those measures, alongside easing Middle East tensions, have helped the rupiah recover from a record low near 18,200 per dollar. 

Price pressures are also building after the government raised prices of widely-used non-subsidised fuel products in June. Students protested Prabowo’s spending plans on Jun 12, including his flagship US$15 billion free-meals programme that is being probed for corruption.

“We expect BI to deliver another 25-basis point rate hike as monetary policy continues to provide near-term support for the rupiah while the government works to restore fiscal credibility,” CIMB Bank analysts Lim Yee Ping and Michelle Chia wrote in a Jun 15 note. 

Philippines

The Bangko Sentral ng Pilipinas will raise its target reverse repurchase rate by 25 basis points to 4.75 per cent, according to 23 of the 30 analysts in a poll. The rest expect a 50-basis point increase.

The Philippines, which sources nearly all its oil from the Middle East, expects it could take up to a year for domestic fuel prices to fall back to prewar levels, even with the potential US-Iran peace deal. Inflation stood at 6.8 per cent in May, and it is expected to average above the BSP’s 2-4 per cent target for 2026 and 2027.

Any further tightening would have to be weighed against its impact on growth, which has barely recovered from the drag of a massive corruption scandal in 2025.

The Philippine economy expanded by a paltry 2.8 per cent in the first quarter of 2026, below estimates and the slowest pace outside the pandemic since end-2009. Household spending, which accounts for about 80 per cent of national output, was the weakest since 2010 even before the war sent inflation soaring.

“Global tensions have quieted down for now, but the current peace deal is fragile and could easily fall apart,” said Emilio Neri Jr, lead economist at the Bank of the Philippine Islands, who is calling for a larger, 50-basis point increase in the key rate.

“With real interest rates still deeply negative, the BSP is highly exposed if global supply chains get hit again,” he added.

The peso has regained some ground after hitting a record low of 61.750 to a dollar earlier in June, but it remains down 2.6 per cent in 2026. Further depreciation could amplify imported inflation, making the exchange rate an increasingly important policy consideration, Neri said. BLOOMBERG