BSP sees April inflation heating up to 3-year high
Inflation may have moved further outside the government’s target and quickened to its fastest pace in three years in April, according to estimates from the Bangko Sentral ng Pilipinas (BSP), which warned that price pressures have “intensified” as the conflict in the Middle East drives up oil costs.
Consumer prices likely rose between 5.6 percent and 6.4 percent from a year earlier last month, the central bank said in a statement on Thursday. The forecast suggests inflation surpassed the 4.1 percent rate recorded in March and breached the BSP’s 2 percent to 4 percent target band for a second straight month.
If the upper end of the range is realized, it would mark the fastest pace of price increases since April 2023, when inflation reached 6.6 percent on higher food costs.
The Philippine Statistics Authority is scheduled to release the official figure 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.
“The anticipated decline in vegetable and fruit prices may help temper inflation, but sources of upside price pressures continue to warrant close monitoring,” it added.
The BSP has already moved to tighten policy in response to the global oil shock tied to the US-Israel war with Iran, now in its ninth week with no clear end in sight. The central bank raised its key policy rate by a quarter point to 4.5 percent at its April 23 meeting, where policymakers also weighed a larger half-point increase as they acknowledged a “deteriorating” inflation outlook.
Policymakers said inflation may average 6.3 percent this year and 4.3 percent in 2027—breaching the central bank’s target range. BSP Gov. Eli Remolona Jr. earlier told Bloomberg that the market can expect a succession of “modest” rate hikes, adding that the BSP “will do what’s necessary to contain inflation.”
Higher borrowing costs are intended to temper consumption and ease demand-driven price pressures, though they also risk slowing economic growth. Remolona has acknowledged that interest-rate increases are a blunt tool for supply-driven shocks but said they can help anchor inflation expectations.
“The BSP will remain vigilant and guided by incoming data, specifically on inflation and growth prospects,” the BSP said. “We will continue to monitor recent developments in the Middle East for their implications on inflation and economic activity.”
Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, said last month’s move may prove a “one-and-done” insurance hike followed by an extended pause unless the ceasefire in the Middle East collapses.
“The Board’s next move is likely to be a rate cut at some point this time next year, when this external price shock starts to drop out of the year-on-year inflation picture,” Chanco said.
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