Philippine Inflation Jumps to 7.8% as Fuel Costs Bite

Philippine inflation rose to 7.8% in October from 7.2% in September, the Philippine Statistics Authority reported Thursday morning in Manila, the highest since February 2023, per Philstar and GMA News.

A year earlier the rate was 1.7%. The year-to-date average is 5.6%, above the government's 2% to 4% target range, GMA News and Rappler reported.

What drove it

Transport inflation jumped to 20.1% from 14.6% and accounted for 62.9% of the increase, GMA News reported. Housing, water, electricity, gas and other fuels rose to 9.3% from 8.4%. Rice prices were up 20.7% from a year earlier, per The Manila Times and GMA News. Core inflation (which strips out volatile food and energy) reached 5.4%, per Philstar and Rappler. Food inflation eased from September, though outlets reported slightly different figures for that index.

Here's how an oil shock spreads. Fuel costs hit first at the pump, then in jeepney and bus fares, then in the cost of trucking rice and vegetables to market. When core inflation climbs too, the pressure has moved past energy into everyday prices. A central bank answers by raising rates, which makes borrowing dearer and slows spending.

The policy response

The Bangko Sentral ng Pilipinas raised its policy rate by 50 basis points to 5.5% on Oct. 22, its fourth straight hike, Nikkei Asia and GMA News reported. The BSP said it expects inflation to stay high through 2027 and approach its 3% target in 2028. Its next scheduled meeting is Dec. 17, per a UOB research note.

The government also plans a 3-billion-peso fuel subsidy for about 300,000 farmers, fisherfolk and drivers, the state-run Philippine News Agency reported.

In our opinion: A one-month swing from 14.6% to 20.1% in transport costs is the kind of number that shows up in grocery bills a few weeks later. The stake is household budgets in a country where both the central bank and the treasury are now spending ammunition on the same problem. Watch the Dec. 17 BSP decision and the November reading in early December to see whether lower global oil prices reach Manila's pumps.