Poll: March inflation likely hit 3.8% amid global oil crisis
Inflation may have quickened in March and came close to the upper end of the central bank’s target range, driven by higher transport costs after the US-Iran war triggered a global energy crisis worse than the combined force of previous oil shocks.
Consumer prices were 3.8-percent higher in March than a year earlier based on the median estimate of nine economists polled by the Inquirer last week. If the projection holds, the Philippine Statistics Authority will report on April 7 a pickup from February’s 2.4-percent increase.
The estimate settled within the 3.1-percent and 3.9-percent forecast range of the Bangko Sentral ng Pilipinas (BSP).
Overall, both the central bank and market consensus indicate that the consumer price index rose near the upper limit of the official 2-percent to 4-percent target band in March.
But for observers like Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines, inflation last month may have already breached the central bank’s target range.
He estimated price gains to have hit 4.22 percent, citing unfavorable base effects and higher food prices.
“Transport and utility costs also likely contributed following recent movements in global oil prices, while core inflation remains relatively stable for now,” Asuncion said.
“However, the persistence of supply‑side pressures raises the risk of second‑round effects, particularly through higher transport fares, electricity costs, and wage‑related adjustments,” he added.
War broke out on Feb. 28 after the United States and Israel launched joint attacks against Iran.
The conflict has disrupted traffic in the Strait of Hormuz, a narrow shipping lane where 20 percent of global oil supply passes.
National emergency
For oil-importing countries like the Philippines, the disruption has sparked alarm.
The nation became the first to declare a state of national energy emergency, while the head of the International Energy Agency warned that the crisis rivals the twin oil shocks of the 1970s, combined with the fallout from Russia’s 2022 invasion of Ukraine.
Global crude prices have surged past $100 per barrel, and concerns over prolonged regional instability have strengthened the US dollar, weakening the Philippine peso beyond 60 per dollar.
“The surge in fuel prices is also beginning to transmit into higher transport costs, putting upward pressure on fare adjustments despite the government’s call to defer hikes,” Emilio Neri Jr., lead economist at Bank of the Philippine Islands, said. He projected March inflation at 3.9 percent.
“Fare increases tend to be sticky and non-linear, feeding into household inflation expectations, distribution costs, and eventually wage demands,” Neri added.
The oil shock has already shaped the central bank’s policy stance ahead of its scheduled April 23 meeting. Officials opted for an off-cycle decision late last month to keep the policy rate unchanged at 4.25 percent, even as they raised their average inflation forecast for 2026 to 5.1 percent.
Governor Eli Remolona Jr. has said that raising borrowing costs to fight inflation could delay the economy’s rebound from a confidence shock triggered by a major corruption scandal. He added that higher interest rates—typically used to curb demand-driven inflation—would do little to counter supply-side price pressures stemming from the Iran conflict.
“Looking ahead, inflation will likely breach the BSP’s tolerance band starting next month, especially if the conflict in the Middle East becomes persistent and elevated fuel costs would spill over into higher electricity rates and transport fares,” said Domini Velasquez, chief economist at Chinabank. She projected March inflation at 3.5 percent.
Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, said inflation may have bolted to 3.8 percent last March, adding that the BSP “really set a high bar” for itself on interest rate hikes.
“We doubt inflation will get this bad this year, so our base case is that the Monetary Board will remain on hold for the foreseeable future,” Chanco said.
******
Get real-time news updates: inqnews.net/inqviber
