The Bangko Sentral ng Pilipinas (BSP) now expects inflation to exceed its 4 percent target until next year, driven by rising global oil and fertilizer prices stemming from the ongoing Middle East conflict.
"The inflation outlook has deteriorated amid the ongoing conflict in the Middle East. Higher global oil and fertilizer prices have begun feeding through to domestic fuel and food prices," the central bank said on Thursday.
The warning came alongside the BSP's announcement of a 25-basis-point increase in its benchmark interest rate. The move aims to counter mounting price pressures, which have already pushed March inflation to 4.1 percent, up from 2.4 percent in February.
"Average headline inflation is seen to breach the 4-percent tolerance ceiling in both 2026 and 2027," the BSP noted, adding that inflation expectations have risen further, heightening the risk of de-anchoring from the target.
The central bank attributed the price spikes to shockwaves from the Middle East war, which have caused oil prices to surge and the Philippine peso to depreciate significantly. Core inflation has also continued to climb, signaling broadening underlying price pressures across the economy.