BSP Flags Upside Inflation Risks from Food and Fuel Price Increases
The Bangko Sentral ng Pilipinas (BSP) has highlighted significant upside risks to the inflation rate for January 2026, primarily driven by upticks in the prices of essential food items such as rice and fish. In its latest advisory, the central bank projected that inflation for the month could range between 1.4 to 2.2 percent, emphasizing the potential impact of these cost pressures on the overall economic outlook.
Multiple Factors Contributing to Price Pressures
According to the BSP statement released on Friday night, January 30, 2026, several key factors are expected to contribute to higher price increases. These include increased domestic fuel costs, the annual adjustment in excise taxes for alcohol and tobacco products, higher water and toll rates, as well as the depreciation of the Philippine peso. The central bank noted that these elements collectively pose additional risks to the current month's rate of price increases, potentially pushing inflation beyond earlier estimates.
Offsetting Factors and Monetary Policy Stance
Despite these challenges, the BSP pointed out that some factors could help mitigate the inflationary pressures. Specifically, lower electricity charges in areas serviced by Meralco and stabilizing vegetable prices are seen as partial offsets to the rising costs. The central bank reaffirmed its commitment to monitoring both domestic and international developments that affect inflation and growth, adhering to a data-dependent approach in its monetary policy decisions. This cautious stance aims to balance economic stability with price control measures.
Historical Context and Future Projections
Looking back, inflation in 2025 averaged at 1.7 percent, which was below the government's target band of two to four percent. This lower rate was partly attributed to effective government interventions that ensured adequate supply and maintained stable food prices. For the current year, monetary officials forecast that the domestic inflation rate will accelerate but remain within the target band of two to four percent, reflecting ongoing efforts to manage economic variables amidst global and local uncertainties.
The BSP's advisory underscores the delicate balance required in navigating inflation risks, as it continues to assess how factors like food prices and currency fluctuations will shape the Philippine economy in the coming months.
