PHL inflation may breach 4% in mid-2026 due to weather risks

WEATHER DISRUPTIONS and base effects may cause inflation to overshoot the Bangko Sentral ng Pilipinas’ (BSP) target range anew next year, an analyst said.

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Philippine National Bank economist Alvin Joseph A. Arogo said the consumer price index (CPI) could breach the upper end of the BSP’s 2-4% annual goal again in mid-2026 after falling well within the target for this year thus far.

“Headline inflation could slowly but steadily increase and breach the BSP’s 4.0% ceiling from April to July next year, in our view,” Mr. Arogo said in an email. “Coupled with unfavorable base effects, key drivers are the seasonal weather disruptions as well as increases in wages and power rate adjustments.”

The last time the monthly CPI figure breached the BSP’s 2-4% target was in July 2024, when it was at 4.4%.

Headline inflation quickened to 1.5% in August from 0.9% in July, the government reported last week. This marked the sixth straight month that the CPI was below the BSP’s 2-4% target.

The August print brought the eight-month average to 1.7%.

Mr. Arogo said they expect inflation to average at 1.9% this year and 3.5% next year. These are higher than the BSP’s own forecasts of 1.7% for 2025 and 3.3% for 2026.

“We believe that the August print is an indicator that the disinflation cycle may have reached its bottom in July,” he said.