MANILA – Rising global oil prices linked to the Middle East conflict may push the Philippines’ inflation rate above the four percent mark this year, according to Rizal Commercial Banking Corporation chief economist Michael Ricafort.

Domestic inflation in January stood at 2 percent, at the lower end of the Bangko Sentral ng Pilipinas’s 2–4 percent target band, following a prolonged period below target in 2025. In February, inflation accelerated to 2.4 percent, which monetary officials said was expected.

“Inflation would likely go up and could potentially breach above the 4 percent upper range of the BSP’s inflation target, as high oil/fuel prices would lead to higher fares, wages, and other prices of other affected goods and services or second-round inflation effects, leading to faster actual inflation and also higher inflation expectations,” Ricafort told the Philippine News Agency on Saturday.

The US benchmark West Texas Intermediate (WTI) crude oil price was at USD98.32 per barrel at the time of reporting. Locally, diesel prices may rise by PHP16.60 to PHP17.50 per liter next week, while gasoline could increase by PHP7.50 to PHP8.50 per liter.

Ricafort said targeted government subsidies could help mitigate inflationary pressures. “Previous administrations/economic teams used targeted subsidies as alternative amid the delicate balance to reduce pass-through of higher prices/mitigating impact inflationary effects while managing limited financial resources to prevent wider budget deficits and prevent incurring additional borrowings/debt,” he said.

He added that the central bank may adopt policy measures similar to those during the start of the Russia-Ukraine war to keep inflation within target, even if such actions temporarily slow economic growth.

In February, the BSP’s Monetary Board lowered the key policy rates by 25 basis points to a three-year low of 4.25 percent for the target reverse repurchase rate, marking a 2.25-percentage-point reduction since August 2024.