Six months ago, the conversation among Philippine finance leaders was about how much further the Bangko Sentral ng Pilipinas would cut rates. Today, it is about how much further it will hike them.

The reversal has been quick. The Monetary Board eased to 4.25 percent in February, held steady at an unscheduled meeting in March, then reversed course with back to back increases in April and June, bringing the policy rate to 4.75 percent. Governor Eli Remolona has been candid that the door remains open for more tightening, even a larger move if the data calls for it, though he has said he would rather see the BSP take measured steps than a single large one.

For a business owner, that is a headline. For a treasury team, it is a set of open questions that need answers before the Monetary Board's next policy meeting on August 27.

The real question isn't where rates go next

Most commentary on this cycle focuses on prediction: will the BSP hike again, or is 4.75 percent the peak? That is the wrong question for treasury teams to focus on. Rate calls are difficult even for the professionals whose full time job it is to make them. What a treasury function can control is how well it is positioned regardless of which way the next decision goes.

That means building a plan with two tracks, not one.

The Q2 GDP report, due August 7, sits squarely between now and that decision. Some economists see it as the swing factor: a soft print supports the case for a pause, while a stronger one keeps the door open for another hike.

If the BSP holds at its next meeting. This becomes the strongest signal yet that 4.75 percent is close to the ceiling for this cycle. Treasury teams that have been waiting on the sidelines gain a clearer window to lock in financing costs, since floating rate exposure has likely priced in most of the expected tightening already. It is also a reasonable point to reassess whether short term deposits are still the best use of excess cash, or whether slightly longer tenors now make more sense given rates may have topped out.

If the BSP hikes again. The calculus shifts. Any variable rate debt still on the books becomes more expensive to carry, and receivables collection discipline matters more, since every week of delay now compounds against a higher cost of capital. This is also the scenario where liquidity buffers deserve a second look. A cushion that felt adequate at the current rate may be thinner than it looks after another increase, particularly for businesses with seasonal cash flow patterns in the second half of the year.

Questions worth answering now, not later

Regardless of which track plays out, there are decisions that are better made deliberately now than reactively later.

Should we refinance fixed or floating? If a meaningful share of your debt is still floating, this cycle is the moment to model out what a fixed rate conversion would cost against what continued floating exposure could cost under both scenarios above. The answer is rarely obvious, but the exercise itself often reveals gaps in how the decision has been made in the past.

What should we assume about working capital? Financing costs feed directly into how working capital is priced internally, whether that is through inventory carrying costs, supplier terms, or how aggressively receivables are chased. Assumptions set during the easing cycle two years ago are almost certainly stale now.

Where should excess cash sit? Cash that isn't actively deployed in the business has more options today than it did during the easing cycle, but those options carry different risk and liquidity tradeoffs. This is worth a genuine review rather than defaulting to whatever the treasury has always done.

Have we stress tested liquidity for a higher rate environment? Many liquidity plans were built assuming the easing cycle that ran through 2024 and early 2026 was the new normal. That assumption no longer holds. A short stress test against a sustained 4.75 to 5.25 percent environment is a useful gut check before the second half of the year gets busy.

Have we revisited our lending covenants? This is the question most often left out of rate commentary, and it shouldn't be. As interest expense rises, covenant headroom can quietly narrow, particularly for organizations carrying leverage ratio or debt service coverage ratio (DSCR) requirements tied to floating rate facilities. Treasury teams should revisit these covenants well before a test date forces the conversation with a lender, not after.

Preparing Either Way

Treasury has always been measured by its ability to preserve liquidity while supporting growth. Higher interest rates do not change that responsibility. They simply raise the cost of getting it wrong. The organizations that navigate this cycle best will be those that have already stress-tested their financing, liquidity, and capital allocation decisions before the next Monetary Board announcement arrives.

This article is intended for general informational purposes and reflects publicly available data as of the date of writing. It does not constitute financial, legal, or investment advice specific to any organization. Readers should consult with their own advisors before making financing, treasury, or liquidity decisions.