THE Bangko Sentral ng Pilipinas (BSP) should keep monetary policy sufficiently tight given inflation risks, the research unit of Metropolitan Bank & Trust Co. (Metrobank) said.

"Upside risks to inflation remain due to still-elevated food prices and heightened geopolitical risks that could lead to renewed supply shocks," Metrobank Research said in a note late Friday.

Inflation has been rising since February and hit 3.8 percent in April. The Bangko Sentral ng Pilipinas said the rate could have topped the 2.0- to 4.0-percent target last month.

Data for May will be released by the Philippine Statistics Authority this Wednesday.

Metrobank Research said that domestic headline inflation could peak in July.

"This supports our view that the BSP will start its easing cycle in the fourth quarter, rather than third quarter, when inflation expectations have settled well within the BSP's 2-4 percent range," it added.

The central bank has kept its benchmark interest at 6.5 percent — the highest since 2007 — for the last five policy meetings and has hinted of a potential easing in August with the inflation outlook having improved.

An August cut will precede an anticipated easing by the United States Federal Reserve and has already weighed on the peso, which has been trading at the P58:$1 level and hit a 19-month low of P58.68 on Monday.

Metrobank Research said the BSP should start easing after the US central bank most likely starts cutting its own rates in September.

Despite the current weakness, the peso is expected to end the year at P56.10:$1.