BSP flags rising inflation risks

Upgrade to High-Speed Internet for only ₱1499/month!

Enjoy up to 100 Mbps fiber broadband, perfect for browsing, streaming, and gaming.

Visit Suniway.ph to learn

April 10, 2026 | 12:00am

MANILA, Philippines —  The Bangko Sentral ng Pilipinas (BSP) signaled growing concern over inflation risks after March price growth breached its forecast range, prompting analysts to reassess the central bank’s next move, with some now seeing a rate hike as early as this month.

In a statement, the BSP said inflation accelerated to 4.1 percent in March, exceeding its 3.1 to 3.9 percent projection and marking a sharp pickup from 2.4 percent in February, largely driven by higher fuel and food costs.

“The inflation risk environment has significantly shifted to the upside amid the ongoing conflict in the Middle East,” the central bank said.

It warned that a sharp and prolonged oil price shock could trigger spillover effects, potentially broadening price pressures across the economy, disanchoring inflation expectations and generating second-round effects.

“Looking ahead, mounting risks to the inflation outlook require sustained vigilance. The BSP will carefully consider incoming data at its upcoming monetary policy meeting to assess the need for action,” it added.

In March, transport costs surged following the spike in domestic fuel prices, while electricity rates also rose due to higher generation and transmission charges. Food inflation likewise picked up, led by higher rice prices amid the lean season and increased logistics costs.

Core inflation, which excludes volatile food and energy items, edged up to 3.2 percent from 2.9 percent, suggesting early signs that price pressures are beginning to spread more broadly.

Nomura Global Markets Research said the latest inflation print, along with rising core prices, increases the likelihood that the BSP could reverse its easing cycle sooner than expected.

“After flagging the risk of BSP responding with an outright rate hike… we now change our call and forecast a 25-basis-point hike… on April 23,” Nomura said, noting that inflation has breached the central bank’s target and could continue to accelerate.

Nomura also warned that if global oil prices stay high, the BSP could be forced to deliver additional tightening beyond April to anchor inflation expectations.

Meanwhile, BPI lead economist Jun Neri said inflation is likely to rise further in the coming months as the impact of higher oil prices feeds through the broader economy.

Neri added that supply constraints involving key commodities such as fertilizers, natural gas and petrochemicals could further push prices higher, depending on how long the conflict persists.

“The BSP will likely hike its policy rate in the coming months despite inflation being driven largely by supply-side shocks,” Neri said, noting that second-round effects and rising inflation expectations could eventually warrant policy action.

“Higher rates may also help preserve gross international reserves by limiting peso depreciation and reducing the risk of negative real interest rates that could further weaken the currency. Given all of these, we expect a 25-basis-point hike at the April 23 policy meeting.”

With risks now tilted to the upside, analysts said the trajectory of oil prices and the emergence of second-round effects would be crucial in shaping the BSP’s next move.