Inflation seen at over two-year high in April

Median forecast at 5.6 percent

MANILA, Philippines — The combined impact of higher oil prices, rising food costs and the peso’s sharp depreciation likely pushed inflation to its fastest pace in more than two years in April, raising the risk of further monetary tightening.

A poll of 10 economists conducted by The STAR yielded a median forecast of 5.6 percent for April inflation, higher than the 4.1 percent print in March.

If realized, this would mark the fastest inflation in 31 months or since the 6.1 percent recorded in September 2023. It would also be the fifth straight month of rising inflation.

The Philippine Statistics Authority is set to release the April inflation report tomorrow.

Forecasts ranged from five percent to 6.2 percent, with all economists expecting price growth to exceed the Bangko Sentral ng Pilipinas (BSP)’s two to four percent target range for the month.

Chinabank chief economist Domini Velasquez had the highest estimate at 6.2 percent, citing higher fuel and cooking gas prices as well as increases in key food items such as rice, meat, fruits, eggs and cooking oil.

She said electricity rates also increased in areas served by Manila Electric Co., while water tariffs rose in areas served by Maynilad Water Services Inc. and Manila Water Co. Inc. But lower vegetable prices could partially offset these pressures.

Looking ahead, Velasquez expects inflation to remain above six percent for the rest of the year as geopolitical risks continue to cloud the outlook for global oil prices.

“Uncertainty surrounding a lasting resolution to the Middle East conflict continues to pose upside risks to global oil prices and, consequently, domestic fuel prices,” she said.

“In addition, constrained fertilizer supply and the potential onset of El Niño could weigh down agricultural output and lead to higher food prices.”

HSBC Global Research senior ASEAN economist Aris Dacanay said the consumer price index (CPI) likely jumped by six percent in April as gasoline prices spiked by 25 percent month-on-month, while diesel prices rose by 46 percent. Rice prices also went up to P46.8 per kilo in Metro Manila.

“With rice and energy being large components of the Philippine CPI basket, second-order effects on inflation – particularly in restaurants, furnishings and non-volatile food items – might have pushed inflation higher,” he said.

Dacanay said the BSP would likely monitor the extent of spillover effects from food and energy costs to broader prices, especially as private consumption remains weak.

“The central bank will likely keep an eye on the extent to which weak demand could stem the spillover effects of food and energy on inflation,” he added.

Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, expects a “fairly hot print” of 5.8 percent for April, “with both food and transport inflation driving more upside to the headline rate.”

BPI lead economist Jun Neri penciled in a 5.7-percent print, while Metrobank chief economist Nicholas Mapa matched the poll median at 5.6 percent.

Security Bank research head and chief economist Angelo Taningco sees April inflation at 5.5 percent.

He likewise attributed the expected pickup in inflation to “sharper price increases in petroleum products, electricity and select food items such as rice, meat, fruits and steep peso depreciation.”

Meanwhile, PNB chief economist Alvin Arogo said the bank raised its April inflation forecast to 5.4 percent from four percent, while its full-year 2026 inflation projection was also increased to 5.4 percent from 3.8 percent previously, mainly due to elevated fuel prices.

Ateneo Center for Economic Research and Development senior research fellow Ser Percival Peña-Reyes said inflation will rise to 5.3 percent in April due to “continued oil price shocks from global conflicts,” spillovers to transport and food costs, as well as currency and electricity price pressures.

UnionBank chief economist Ruben Carlo Asuncion forecasts April inflation at 5.1 percent and Reyes Tacandong & Co. senior adviser Jonathan Ravelas at five percent.

The sharper inflation outlook comes after the Monetary Board raised its benchmark interest rate by 25 basis points on April 23, bringing the policy rate to 4.5 percent.

The move marked the first rate increase since October 2023 as the central bank sought to prevent the oil-driven price shock from feeding into broader inflation expectations.

Asuncion said the BSP’s latest 25-basis-point rate hike should help temper inflation expectations and limit broader price spillovers, even as the main sources of inflation remain supply-driven.

“Looking ahead, inflation is likely to stay above target in the near term, keeping the door open for further calibrated policy tightening if upside risks persist,” he said.

For Ravelas, the rate increase was largely a signal that the BSP is prepared to act against inflation risks, although its effect on actual prices would likely take time to materialize.

“Inflation may stay above the upper end of the BSP’s target in the coming months, we may see a series of rate hikes. Further action will be data-dependent, mainly hinging on food prices, oil, and inflation expectations,” he added.

The Monetary Board will next meet on June 18.