Philippine inflation is projected to breach the central bank’s 4% target ceiling this year as global oil prices approach $100 per barrel amid escalating conflict in the Middle East.
Domestic inflation, which sat at the lower end of the Bangko Sentral ng Pilipinas (BSP) target at 2% in January, accelerated to 2.4% in February. The upward trajectory is expected to continue, drawing parallels to the price shocks seen four years ago at the onset of the Russia-Ukraine war.
Rizal Commercial Banking Corp. chief economist Michael Ricafort told the Philippine News Agency on Saturday that high fuel costs will likely trigger broader economic pressure.
“Inflation would likely go up and could potentially breach above the 4 percent upper range of the BSP’s inflation target, as high oil/fuel prices would lead to higher fares, wages, and other prices of other affected goods and services or second-round inflation effects,” Ricafort said.
As of Saturday, the U.S. benchmark West Texas Intermediate (WTI) stood at $98.32 per barrel. The spike is expected to hit local pumps next week, with projected hikes of ₱16.60 to ₱17.50 per liter for diesel and ₱7.50 to ₱8.50 per liter for gasoline.
To mitigate the impact, Ricafort noted the government may deploy targeted subsidies to “reduce pass-through of higher prices” while balancing “limited financial resources to prevent wider budget deficits.”
On the monetary front, the BSP has already been aggressive, cutting the target reverse repurchase rate by 25 basis points in February to a three-year low of 4.25%. This brought total reductions to 2.25 percentage points since August 2024.
Ricafort suggested the BSP may revisit previous high-frequency policy shifts to ensure price stability, “even if the unintended consequences include slowing down the economy as part of doing all the necessary measures and utilization of all tools needed to fulfill the mandate of price stability.”
