(Bloomberg) -- The Philippine central bank will likely slow the pace of interest-rate increases Thursday, tracking the Federal Reserve that moved by a quarter-point to tame inflation which it sees as a greater risk than a turmoil in the banking system.

Bangko Sentral ng Pilipinas will probably raise the overnight reverse repurchase rate by 25 basis points to 6.25%, according to all but one of 22 economists in a Bloomberg survey conducted before the Fed’s decision. That will take the cumulative increases to 425 basis points since May, which included four half-point moves and two 75 basis-point actions.

With headline inflation slowing last month for the first time since August, Philippine policymakers can afford to shift to a smaller hike although it may be too early to pause as the core gauge was at the fastest in 24 years in February.

Hours earlier, Fed Chairman Jerome Powell reiterated the authority’s resolve to restore price stability, while showing confidence that higher rates won’t deepen the woes in the banking sector. 

That will make the Philippines one of the last bastions of tightening in Southeast Asia, where some peers have already switched to a pause, with Vietnam even pivoting to some sort of easing to support economic activity. 

The peso, which has emerged the strongest among the most-active currencies in Asia so far this year, was little changed at the Thursday open as peers including the Thai baht advanced. The main stock index fell 0.5% after a two-day rally.

Here’s what to watch for in Governor Felipe Medalla’s speech at 3 p.m. in Manila:

Banking Turmoil

While Medalla has said Philippine lenders don’t have material exposure to the turmoil in the US banking system and woes at Credit Suisse Group AG, BSP has pledged to respond to developments as needed.

“Our view is that this is limited to specific concerned banks and that the banking system in the Philippines remains robust,” said Domini Velasquez, economist at China Banking Corp. in Manila. 

Velasquez, however, said a “contagion effect of the bank fallout in the US” could lead to wealth losses and disinflation. 

Price Outlook

That will make the BSP’s latest view on inflation outlook a closely watched topic for investors, given the central bank had only last month raised its inflation forecasts for this year and the next.

“It is too early to conjecture that inflation risks in the Philippines have retreated,” said Debalika Sarkar, an economist at Australia & New Zealand Banking Group Ltd. “Even if there is a downward turn, inflation is unlikely to fall back into the official target range” before the fourth quarter.

Reserve Ratio

Officials may also provide more clues as to when BSP will resume cutting banks’ reserve requirement ratio in line with a broader plan to bring it down to single digits from the current 12% level. 

Medalla said it could happen this year, once inflation is clearly moving toward BSP’s target band of 2%-4%.

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