Inflation is becoming more broad-based in the Philippines, with three-fourths of the consumer price basket now recording price increases exceeding 4 percent, reinforcing expectations of further monetary tightening, according to Citi.
The cumulative weight of consumer price index components with inflation above 4 percent rose to 75.3 percent in October from 74.3 percent in September, indicating that price pressures are spreading beyond a handful of volatile commodities.
The breadth of inflation has increased even as food price growth eased, with higher transport fares, appliances, apparel and selected services contributing to the latest acceleration. Headline inflation reached 7.8 percent in October, while core inflation, which strips out volatile food and energy prices, climbed to 5.4 percent.
“Core inflation meanwhile is expected to further increase in coming months as cost price pass-through continues,” Citi said, pointing to the risk that higher input and operating costs will increasingly feed into consumer prices.
The bank retained its forecast of a 25-basis-point Bangko Sentral ng Pilipinas rate increase in December, which would bring the policy rate to 6 percent, implying further tightening beyond its expected November policy decision.
However, Citi said a larger 50-basis-point increase in November remained possible if inflation accelerated or the peso weakened more rapidly than expected.
Citi expects headline inflation to remain between 7.5 and 8.1 percent through the first quarter of 2027, suggesting households and businesses will contend with elevated price pressures for several more months.
“We think it is too early to call that inflation has peaked,” the bank said.
Lower global oil prices could provide some relief by easing energy costs and pressure on the peso. However, food supply risks remain, particularly with El Niño threatening agricultural output.
Unhusked rice production fell about 17 percent year on year in the third quarter, while below-normal rainfall is expected to persist through early 2027.
The outlook points to continued monetary tightening even as economic growth remains sluggish, raising the prospect of higher borrowing costs for households and businesses.
