The Bangko Sentral ng Pilipinas (BSP) has warned that April's inflation rate likely accelerated to its highest level in three years, driven by escalating oil costs amid the Middle East conflict. The central bank's estimate places consumer price growth between 5.6% and 6.4% year-on-year, exceeding March's 4.1% and breaching the 2%-4% target range for a second consecutive month.
If the upper end of the forecast materializes, it would be the fastest pace since April 2023's 6.6%. The Philippine Statistics Authority will release official data on May 5.
"Inflation risks have intensified amid upward price pressures from significantly higher domestic petroleum prices, rising prices of key food items such as rice, fish and meat, increased electricity charges, and the peso depreciation," the BSP said in a statement. The central bank noted that while lower vegetable and fruit prices may provide some relief, upside risks warrant close monitoring.
The BSP responded by raising its key policy rate by 25 basis points to 4.5% in April, with policymakers considering a larger hike. Governor Eli Remolona Jr. indicated further "modest" rate increases may follow. The central bank now projects average inflation of 6.3% this year and 4.3% in 2027, both above target.
Higher borrowing costs aim to curb demand and anchor inflation expectations, though they risk slowing economic growth. Remolona acknowledged the limitations of rate hikes for supply-driven shocks but emphasized their role in managing expectations. The BSP pledged to remain vigilant and monitor Middle East developments for their impact on inflation and economic activity.