Inflation could have breached 6% in April

INFLATION could have hit a three-year high in April as fuel and electricity costs rose due to the war in the Middle East, the Bangko Sentral ng Pilipinas (BSP) said on Wednesday.

Consumer price growth was estimated to have been in the 5.6- to 6.4-percent range, surging from 4.1 percent in March and staying above the central bank’s 2.0- to 4.0-percent target.

Inflation at the top end of the BSP’s, if realized, would be the highest since April 2023’s 6.6 percent.

Data for April will be released by the Philippine Statistics Authority on May 5.

“Inflation risks have intensified amid upward price pressures from significantly higher domestic petroleum prices, rising prices of key food items such as rice, fish, and meat, increased electricity charges, and the peso depreciation,” the central bank said in a statement.

“The anticipated decline in vegetable and fruit prices may help temper inflation, but sources of upside price pressures continue to warrant close monitoring,” it added.

BSP Governor Eli Remolona Jr. has said that inflation could remain above 5.0 percent due to the Middle East conflict.

March’s surge prompted the central bank’s policymaking Monetary Board to raise key interest rates by 25 basis points (bps) last week. It also raised the inflation forecasts for this year and the next to 6.3 percent and 4.3 percent from 5.1 percent and 3.8 percent.

The inflation outlook was said to have “deteriorated” in the wake of war in the Middle East.

Remolona has said the BSP was “being proactive” and would “stay vigilant and we’ll do as many hikes as necessary.”

Central banks typically “look through” temporary supply-side shocks such as higher oil prices, he added, but the situation had become large enough to warrant a stronger policy response.

On Thursday, the BSP said it would “remain vigilant and guided by incoming data, specifically on inflation and growth prospects.”

“We will continue to monitor recent developments in the Middle East for their implications on inflation and economic activity.​​​​”