UOB economists Julia Goh and Loke Siew Ting report that Philippine headline inflation jumped above the BSP target in March, driven by higher transport, electricity and food costs and a weaker Philippine Peso (PHP). They have raised its 2026 inflation forecast and still expects the central bank of the Philippines, Bangko Sentral ng Pilipinas (BSP) to keep its policy rate at 4.25% on 23 April and through 1Q27.

Higher CPI and steady BSP outlook

"Given the duration and severity of the Middle East conflict remain uncertain while the Philippines’ economy is still recovering from the fallout of public works-related scandals, we believe BSP will likely look through supply-driven inflation pressures and prioritise sustaining domestic growth momentum and jobs in the immediate term."

"At its off-cycle Monetary Board meeting on 26 Mar, the BSP acknowledged the limited effectiveness of monetary policy in addressing supply-side inflation, signalling a shift toward monitoring potential second-round effects, with core inflation guiding near-term policy decisions."

"Against this backdrop, we continue to expect the BSP to keep its policy rate unchanged at 4.25% at the 23 Apr meeting."

"Reflecting the sharper-than-expected increase in Mar inflation and the prolonged disruptions stemming from the Middle East conflict, we now raise our full-year 2026 inflation forecast to 5.5% (from 3.0% previously; BSP est: 5.1%; 2025: 1.7%). Year-ago low base effects and an expected continued weakness in the PHP are likely to further amplify inflationary pressures."

"In the near term, non-monetary interventions by the national government—particularly to contain prices of essential food items, electricity, and public transport—will be critical to keeping inflation in check. Beyond declaring a national energy emergency and rolling out a series of mitigation measures in recent weeks, the government is also considering a temporary suspension of fuel excise taxes, a review of airport-related charges, and the diversification of oil supply sources."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)