Inflation risks rise after target breach in March — BSP

The Bangko Sentral ng Pilipinas (BSP) said inflation risks have “significantly” grown after consumer prices rose faster than expected in March amid the oil crisis.

This came after soaring fuel prices pushed headline inflation to 4.1% last month, well-above than the central bank’s expected 3.1%-3.9% print.

It likewise marked a sharp pick up from the 2.4% in February and 1.8% a year ago, making it the fastest and the first time that it breached the BSP’s target since July 2024.

The central bank wants inflation to stay within 2%-4%, with 3% as its point target.

“The inflation risk environment has significantly shifted to the upside amid the ongoing conflict in the Middle East,” it said in a statement released late Tuesday.

The central bank noted that further escalation of oil shocks would later weigh on the prices of other commodities, which may disanchor its inflation expectation.

“A sharp and prolonged oil price shock could trigger spillover effects with the potential broadening of price pressures to the rest of the CPI basket,” the BSP said. “This could also disanchor inflation expectations and generate further second order impact.”

The BSP had expected inflation to accelerate past its target band by April, with its full-year forecast now at 5.1%.

For now, the central bank said it will continue to assess incoming economic data to determine if it has to take monetary policy action aligned with its price stability mandate.

The Monetary Board will hold its second policy review this year on April 23. — Katherine K. Chan