The Bangko Sentral ng Pilipinas (BSP) is expected to increase its policy rate by 25 basis points on April 23, as inflation risks become more persistent and widespread.
Analysts at the Bank of the Philippine Islands warn that full-year inflation could exceed 5 percent, with monthly inflation possibly nearing 8 percent if global oil prices stay above US$100 per barrel. Although a ceasefire has been reported in the Middle East, oil supply remains constrained due to limited shipping activity, keeping prices elevated.
The impact is not limited to energy. Disruptions in global trade are also affecting key goods such as fertilizers, semiconductors, medicines, and car parts. Experts caution that damage to energy infrastructure could keep oil prices high even if tensions ease.
While current inflation pressures are mainly driven by supply issues, prolonged shocks could start affecting consumer demand and expectations, making inflation harder to control.
Locally, rice prices were already rising due to tight supply. Inflation in March increased by 5 percent, the fastest since October 2023, with rice prices contributing again to overall inflation. Higher oil prices are adding further pressure. There are also concerns that a strong El Niño later this year could worsen food supply shortages.
The local currency the peso is expected to remain weak amid global uncertainty. A weaker currency could push import prices higher, further fueling inflation. This cycle may force the BSP to tighten policy even more.
Meanwhile, the country’s gross international reserves fell to US$107 billion in March, a seven-month low. While still sufficient, the decline suggests weakening buffers. Without a rate hike, continued intervention to support the peso could further reduce reserves and risk sharper currency depreciation.
