Philippine central bank warns of oil spike 'spillover effects' as inflation breaches target
General view of the La Trinidad Vegetable Trading Post where farmers sell their produce, in La Trinidad, Benguet province, Philippines, March 31, 2026. REUTERS/Eloisa Lopez
MANILA, April 7 : The Philippines’ central bank warned on Tuesday of 'spillover effects' on consumer prices from sharp oil price increases, after the country's inflation rate accelerated in March and breached the target range.
Headline inflation rose to 4.1 per cent in March from a year earlier, significantly higher than February’s 2.4 per cent and above the 3.7 per cent median forecast in a Reuters poll. Last month's figure was above the Bangko Sentral ng Pilipinas' (BSP) 2 per cent to 4 per cent target range for the year.
This marks the highest inflation reading since July 2024, when it reached 4.4 per cent.
On a month-on-month basis, inflation stood at 1.4 per cent, the highest level since January 2023, reflecting a sharp increase in price pressures. The Philippines depends heavily on Middle East oil, leaving it vulnerable to supply shocks and price volatility during periods of geopolitical conflict.
The Philippine central bank said on Tuesday that risks to inflation had tilted sharply to the upside as the Middle East conflict drives costs higher.
"A sharp and prolonged oil price shock could trigger spillover effects with the potential broadening of price pressures," the BSP said.
The central bank kept its benchmark rate steady at 4.25 per cent in an off-cycle meeting in March, but has signalled readiness to raise rates if inflation pressures worsen. It will review monetary policy on April 23.
"Looking ahead, mounting risks to the inflation outlook require sustained vigilance," the central bank said.
The main driver in March was transport costs, which surged due to rising global energy prices. Diesel soared 59.5 per cent from a year earlier, while gasoline jumped 27.3 per cent, the fastest gains since September 2022, when global energy markets were disrupted by Russia's invasion of Ukraine. These compare with February’s declines of 1.3 per cent for diesel and 5.7 per cent for gasoline.
As a result, the transport index climbed 9.9 per cent on-year, the most since January 2023 when the index shot up 11.1 per cent.
Core inflation, which excludes food and energy, also edged higher to 3.2 per cent in March from 2.9 per cent in February, suggesting emerging second-round effects.
The central bank had earlier projected inflation to fall within a 3.1 per cent to 3.9 per cent range for March.
