MANILA — The Philippines’ annual inflation rate accelerated more than expected in March, breaching the central bank’s 2% to 4% target range, driven largely by a sharp increase in fuel prices amid escalating tensions in the Middle East.
READ: Philippine annual inflation quickens to 4.1% in March
Headline inflation rose to 4.1% in March from a year earlier, significantly higher than February’s 2.4% and above the 3.7% median forecast in a Reuters poll. This marks the highest inflation reading since July 2024, when it reached 4.4%.
On a month-on-month basis, inflation rose 1.4%, the fastest pace since January 2023, reflecting a sharp increase in price pressures.
The main driver was transport costs, which surged due to rising global energy prices. Diesel soared 59.5% from a year earlier, while gasoline jumped 27.3%, the fastest gains since September 2022, when global energy markets were disrupted by Russia’s invasion of Ukraine. These compare with February’s declines of 1.3% for diesel and 5.7% for gasoline.
As a result, the transport index climbed 9.9% on-year, the most since January 2023 when the index shot up 11.1%.
The Philippines remains heavily dependent on Middle East oil, leaving it vulnerable to supply shocks and price volatility during periods of geopolitical conflict.
Core inflation, which excludes food and energy, also edged higher to 3.2% in March from 2.9% in February, suggesting emerging second-round effects.
The central bank had earlier projected inflation to fall within a 3.1% to 3.9% range for March.
In response to rising risks, it kept its key rate steady at 4.25% at a surprise off-cycle meeting on March 26 and said policy would focus on second-round effects from global oil price shocks. The next monetary policy review is scheduled for April 23.
—Reporting by Mikhail Flores and Nestor Corrales; Editing by John Mair and Kevin Buckland
