Driven by rising fuel, food prices
MANILA, Philippines — Inflation likely accelerated last month, with the Bangko Sentral ng Pilipinas (BSP) projecting it to settle within 3.1 to 3.9 percent in March from 2.4 percent in February, driven by rising fuel, electricity and food prices.
If realized, the upper end of the forecast would mark the fastest inflation print in nearly two years or since the 4.4-percent clip in July 2024.
“Inflation risks have intensified with upward price pressures arising from the significant increase in domestic petroleum prices, higher rice prices, increased electricity charges in Meralco-serviced areas and depreciation of the peso,” the central bank said.
The BSP noted that lower prices of vegetables, fish and meat could help ease price pressures, but warned that upside risks remain and warrant close monitoring.
The central bank said it would remain “vigilant and guided by incoming data” on inflation and the country’s growth prospects.
“We will continue to monitor recent developments in the Middle East for their implications on inflation and economic activity,” the BSP added.
An economist said inflation could pick up further in the coming months as elevated oil prices begin to feed into broader costs.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., expects inflation to hit 3.7 percent in March before accelerating to 5.1 percent in April, bringing the full-year average to around five percent.
Ricafort said the surge in global crude prices, similar to levels seen during the Russia-Ukraine war, could push inflation beyond the BSP’s two to four percent target.
“High oil prices would lead to higher fares, wages and other prices of other affected goods and services or second-round inflation effects,” he said.
This could also lift inflation expectations and increase the likelihood of policy tightening.
“There is a possibility of BSP rate hikes… in an effort to curb inflationary pressures… and prevent it from spiraling further,” Ricafort said, noting that such measures could come at the cost of slower economic growth.
He added that the government might again rely on targeted subsidies for transport groups, fisherfolk and farmers to cushion the impact of higher fuel prices, instead of broad-based tax cuts that could widen the fiscal deficit.
The BSP’s latest inflation outlook comes after the Monetary Board held an off-cycle meeting last week and kept policy rates unchanged at 4.25 percent, as it weighed rising inflation risks against weak economic growth.
The central bank said price pressures are largely supply-driven, limiting the effectiveness of monetary tightening in the near term.