UMVA has learned that the Philippines may be confronting its steepest inflation surge in over three years, as soaring oil prices from the ongoing Middle East conflict ripple through food costs and a weakening peso.
Economists’ median forecast points to a headline inflation rate of 7.9% for May, up from 7.2% in April and far above the 1.3% rise recorded a year earlier, potentially eclipsing the 8.6% peak seen in February 2023.
This projection sits at the upper edge of the central bank’s own 7.1%‑7.9% outlook and would mark the third consecutive month where inflation overshoots the 2%‑4% target.
Analysts attribute the acceleration to persistently high crude oil prices, elevated food prices, lingering base‑effect dynamics, and spillovers into tertiary sectors.
Even though global crude dipped slightly from April to May, pump and bunker fuel costs remain dramatically above last year’s levels, keeping upward pressure on the price index.
Domestic gasoline prices rose by P5.49 per liter, while diesel fell P2.13 and kerosene dropped P17.59 per liter, the latter still benefiting from a temporary excise‑tax suspension.
The central bank’s latest outlook cites a weaker peso and pricier rice, vegetables, and meat as primary drivers, though lower pump prices and electricity rates have offered modest relief.
Electricity bills slipped marginally, with Manila Electric Co. trimming its rate to P14.3345 per kilowatt‑hour, ending a three‑month streak of hikes.
Nevertheless, rice prices surged dramatically: regular milled rice jumped 17.52% to P50.91 per kilo, well‑milled rice rose 15.55% to P57.88, and special rice increased 10.51% to P65.69.
The peso’s continued slide, closing at P61.59 per dollar on May 29 after hitting an all‑time low of P61.75, compounded price pressures across the board.
Analysts warn that unless oil prices ease and broader dollar sentiment improves, the peso may struggle to regain footing, keeping inflation entrenched above target.
Core inflation, which strips out volatile food and fuel items, is believed to have crept from 3.9% to 4.2% in May, potentially breaching the central bank’s tolerance range for the first time since 2023.
Given the stubborn price dynamics, many forecasters expect the monetary board to deliver another 25‑basis‑point hike in June, with a larger 50‑basis‑point increase or even an off‑cycle move lingering on the table.
While some economists caution that aggressive tightening could stifle growth, the prevailing consensus is that the central bank will prioritize reining in inflation before considering any drastic off‑cycle action.
