THE Bangko Sentral ng Pilipinas (BSP) chief yesterday said they were preparing for the worst as uncertainty over the severity of El Niño and volatile global oil prices complicate the country’s inflation outlook.
Speaking at an International Monetary Fund panel in Bangkok, Thailand, Eli Remolona, Jr., BSP governor, said policymakers must be ready for different economic scenarios.
“There have been many kinds of local weather shocks that have been bad, but the effect of El Niño won’t happen till early next year, so we’re holding our breath,” Remolona said.
“But we have to be prepared for the worst,” he stressed.
The current El Niño event is an active, very strong “Super El Niño” declared by the World Meteorological Organization earlier in June and is expected to peak between November and December of this year and persist through the first half of 2027.
Remolona said the central bank’s primary responsibility remained price stability, but uncertainty had changed how monetary policy decisions were assessed, prompting greater attention to alternative scenarios rather than relying on a single economic outlook.
“We still focus on price stability, and I think that’s very important to establish,” Remolona said.
“But the way we do monetary policy has changed. Now, because of all the uncertainties, we do scenarios,” he added.
He said the central bank was looking at different possibilities for oil prices and the potential impact of El Niño.
Remolona said the effects of El Niño were not expected to become apparent until early next year, particularly in January and February.
While localized weather shocks had already been damaging, he argued that it is still too early to determine how severe the broader El Niño impact would be.
“We don’t know how bad it will be. So we have the regular, ordinary El Niño, which is bad. And then we have the Godzilla El Niño, which is really, really bad,” he added.
Remolona said the BSP must account for both possibilities when assessing the outlook and determining the appropriate monetary policy response.
The central bank, in its August policy report, said inflation was likely to peak in the fourth quarter, largely due to the impact of El Niño and base effects.
The inflation outlook for this year has been trimmed to 6.1 percent from the previous 6.4 percent. However, the outlook for next year was raised to 5.4 percent from 4.5 percent.
This means inflation will remain above the 2.0- to 4.0-percent target until the third quarter of 2027.
Data shows a severe El Niño episode could push domestic rice prices up by about 40 percent and corn prices by 25 percent over 12 months.
Strong typhoons linked to the weather pattern could further disrupt local rice production, potentially raising rice prices by about 22 percent from December 2026 to the first quarter of 2027.
The BSP’s policymaking Monetary Board has raised key interest three times this year in a bid to temper inflation, which hit a three-year high of 7.2 percent in April due to the impact of the war in the Middle East.
The rate then eased over the next four months but then surged back to 7.2 percent in September.
Because of the higher-than-target inflation, the policymaking Monetary Board raised the rates by 25 basis points during the August 2026 policy meeting, the third consecutive rate increase.
The action brought the benchmark rate to 5.00 percent.
The September surge in inflation is expected to lead to another rate hike when the board meets on Oct. 22.
