A reaction of the local economy to the internal effects of the ongoing conflict in the Middle East.
On Thursday, March 26, the Bangko Sentral Ng Pilipinas (BSP) said that it is maintaining vigilance against inflation and risks.
“As a data-driven monetary authority, and in light of fast-changing developments and uncertain economic conditions, the Monetary Board met today and decided to maintain the policy rate at 4.25 percent,” it told.
The central bank also noted that the conflict in the Middle East has pushed global oil and fertilizer prices sharply higher, with oil supply disruptions having already resulted to higher domestic fuel prices and transport fares.
Hence, in the latest BSP projections, it was projected that the inflation in 2026 would breach the 4.0-percent ceiling. Although, that would move back towards the tolerance range by 2027.
“Inflation expectations, however, remain well-anchored,” added the Bangko Sentral Ng Pilipinas.
Over the near term, the Monetary Board said that it sees upside risks to inflation as “largely supply-driven,” for which, it told, the monetary policy has limited effectiveness.
“At the same time, the BSP sees continued weak economic growth in 2026,” it continued. “To raise the policy rate at this time would delay the recovery.“
Amid the uncertainty, the central bank said that it will continue to assess how these developments will impact inflation and growth dynamics.
“Looking ahead, mounting risks to inflation will require sustained vigilance. Monetary policy will focus on addressing likely second-round effects that may arise. The Monetary Board will act as needed in pursuit of the BSP’s primary mandate to maintain price stability,” the statement concluded.
In 2025, the Philippine Statistics Authority (PSA) reported that the headline inflation rate for the entire year hit a nine-year low of 1.7%, particularly driven by lower price of rice.