Inflation quickens to 13-month high

Picks up anew to 2.4% in February

MANILA, Philippines —  Inflation in February rose to its highest level in over a year, driven by faster increases in food and utility costs, according to the Philippine Statistics Authority (PSA).

Although it remains manageable for now,  the Bangko Sentral ng Pilipinas (BSP) warned that supply-side pressures and geopolitical tensions could push price growth slightly higher this year.

In a press conference yesterday, National Statistician Dennis Mapa said that headline inflation, or the increase in the price of consumer goods and services, accelerated to 2.4 percent in February from two percent a month earlier and 2.1 percent in February 2025.

While the  latest inflation reading is the highest since the 2.9 percent print in January last year, it still fell within the BSP’s 2.3 to 3.1 percent forecast for February.

However, inflation is likely to edge higher in the coming months, with the BSP projecting it to average 3.6 percent this year due mainly to supply-side pressures.

Mapa attributed the higher inflation print primarily to the faster increase in prices of food and non-alcoholic beverages at 1.8 percent in February from the previous month’s 1.1 percent.

Inflation for food alone registered a faster increase of 1.6 percent in February from the previous month’s 0.7 percent.

Higher utility costs also pushed up inflation in February.

In particular, the housing, water, electricity, gas and other fuels commodity group rose by 3.5 percent in February, up from the previous month’s   3.3 percent.

From January to February, inflation averaged 2.2 percent, within the government’s two to four percent target for the year.

Amid ongoing tensions in the Middle East triggered by the United States and Israel’s strikes on Iran, Mapa said there are risks that could drive up inflation, such as the pressure on gasoline and diesel prices that may affect some utility costs, particularly electricity and liquefied petroleum gas.

He also cited the potential spillover to other commodities, such as food items.

Moody’s Analytics assistant director-economist Sarah Tan said that rising global commodity prices amid the ongoing Middle East conflict pose a significant risk for the Philippines, which imports more than half of its energy needs.

She said higher oil and energy prices could push up both consumer and producer inflation, while also raising import costs and widening the trade deficit.

Tan also said that costlier imports and greater financial outflows could weaken the peso against the dollar.

“While we do not expect inflation to move materially beyond the BSP’s two to four percent target range, upside risks have clearly risen,” she said.

For Department of Economy, Planning and Development Secretary Arsenio Balisacan,  overall price conditions remain stable.

“However, we are mindful of recent geopolitical developments, which we are closely monitoring, along with domestic supply conditions of key commodities,” he said.

Asked whether the Development Budget Coordination Committee is set to review growth targets in light of developments in the Middle East, he said no meeting has been scheduled.

“The government has tools to soften the impact of the Middle East conflict,” he said.

To address upside inflation pressures from the Middle East conflict, the government is considering lifting excise taxes on petroleum products if global oil prices breach $80 per barrel.

“Further, the government will implement measures to reduce fuel consumption, first by government offices and we encourage the private sector to do the same,” Balisacan said.

These energy-saving measures include the use of shuttle buses, carpooling, work-from-home arrangements and compressed workweeks.

As part of strategies to reduce demand for imported oil in the long term, the government is also incentivizing renewable energy and alternative fuels, promoting active transport, and strengthening energy conservation programs.

“We are ready to deploy timely and targeted interventions should external shocks intensify. Our priority is to protect vulnerable households, support affected industries and sustain the country’s growth momentum amid global uncertainties,” Balisacan said.

Emerging risks

While the latest inflation print broadly matched expectations,  analysts warned that emerging risks could push prices higher in the coming months.

In a note, Chinabank Research said the continued rise in core inflation indicates a buildup in underlying price pressures.

Chinabank warned that global developments could push inflation higher in the near term. Higher global oil prices, driven by heightened conflict in the Middle East, could exert additional upward pressure on domestic prices.

“The February print has yet to capture the new round of supply shocks stemming from the Iran conflict, which will likely push both headline and core inflation higher,” it said.

Domestic pump prices are expected to rise further in the near term, with gasoline potentially increasing by about P4 per liter and diesel by around P10 per liter. The bank also flagged possible second-round effects if fuel costs remain elevated for a prolonged period.

Chinabank sees inflation averaging 3.6 percent this year, but the “risk of further acceleration has increased as geopolitical tensions persist.” Still, government interventions could help cushion the impact on consumers.

Senior adviser Jonathan Ravelas of Reyes Tacandong & Co. said February inflation largely matched expectations, but signaled building risks ahead.

“While inflation remains manageable, the third straight monthly uptick tells us upside risks are building — especially if global oil supply disruptions persist.”

From a policy standpoint, Ravelas said the BSP may still have room for further easing this year, although future moves will depend on incoming data.

“I still see room for one more 25-basis-point BSP rate cut in 2026, but policymakers will need to stay data-dependent,” he said.

The BSP has so far slashed policy rates by a total of 225 basis points since August 2024. –  Aubrey Rose Inosante