‘Oil, rice pressures may push inflation higher’

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March 8, 2026 | 12:00am

MANILA, Philippines — Inflation in the Philippines could trend higher in the coming months as volatile global oil prices and rising rice costs begin to build pressure on consumer prices, even as headline inflation remains within the central bank’s target band.

Economists said the recent uptick in inflation signals gradually increasing price pressures, although the outlook will largely depend on developments in energy markets and food supply.

Headline inflation accelerated to 2.4 percent year-on-year in February, up from two percent in January. The latest figure, however, remained within the Bangko Sentral ng Pilipinas (BSP)’s two to four percent target range.

According to ING Think regional head of research for Asia-Pacific Deepali Bhargava, oil prices remain a key risk to the inflation outlook, given the Philippines’ heavy dependence on imported fuel.

“The pickup in oil price inflation warrants monitoring, especially as the Philippines’ retail fuel prices are market-linked,” she said.

The Philippines sources nearly 90 percent of its oil supply from the Middle East, making it one of the most exposed economies in the region to supply disruptions.

According to ING, a sustained 20 percent increase in oil prices from February levels could add around 0.8 percentage points to headline inflation if the rise is fully passed through to domestic retail prices.

However, Bhargava said the impact on inflation could be mitigated if the government activates a provision in the Tax Reform for Acceleration and Inclusion (TRAIN) law that automatically suspends fuel excise taxes when global oil prices exceed $80 per barrel.

“We think that if high oil prices persist, the government may revisit the TRAIN law provision that allows the automatic suspension of fuel excise taxes,” she said.

Bhargava added that the central bank is unlikely to respond to oil-driven inflation pressures with policy tightening, as such pressures are likely to be viewed as temporary supply-side shocks.

Instead, she said the economic drag from higher energy costs could increase the likelihood of another rate cut later this year.

The Bank of the Philippine Islands echoed the view that inflation risks are rising, driven mainly by rice supply constraints and higher global oil prices.

BPI senior vice president and lead economist Jun Neri warned that inflation could approach the upper end of the central bank’s target range in the coming months.

Key risks include weather-related supply disruptions, rice price momentum, currency volatility and movements in global oil prices.

Rising geopolitical tensions in the Middle East have pushed crude prices higher, with West Texas Intermediate (WTI) currently trading around $76 per barrel, roughly 30 percent higher than at the start of the year.

A prolonged oil price spike can amplify inflationary pressures by raising fuel, transport, power and logistics costs, increasing the risk of broader second-round effects.

Neri said the trajectory of oil prices could also influence the BSP’s policy path.

“If WTI crude sustains near or above $80 per barrel through June, and/or rice inflation continues to accelerate, the BSP’s easing bias could be materially constrained,” he said.

Under this scenario, the central bank may opt to keep policy rates steady rather than continue easing.

However, if geopolitical tensions ease and oil prices retreat while economic activity remains soft, Neri said the BSP could still move toward a rate cut in the second half of the year.

Meanwhile, Bhargava said higher oil prices could also weigh on the peso by widening the country’s current account deficit.

ING expects the peso to average around 59 to the dollar in the first quarter, with risks tilted toward modest further weakness if oil prices remain elevated.