March headline inflation accelerated beyond the Bangko Sentral ng Pilipinas’ (BSP) projection, which the central bank largely attributed to higher fuel prices and the spillover effects of the ongoing conflict in the Middle East.

In a statement, the BSP said inflation rose to 4.1 percent in March from 2.4 percent in February, exceeding its forecast range of 3.1 percent to 3.9 percent. The central bank cited the ongoing conflict involving Iran, Israel and the United States as a key driver of the increase.

“Headline inflation rose due mainly to domestic petroleum prices, which surged as the ongoing Middle East conflict disrupted key global oil supply channels. Electricity rates also rose due to higher transmission and generation charges,” the BSP said.

“Food inflation likewise increased due to higher domestic rice prices. Farmgate prices rose due to the lean season, while postharvest, transport, and logistics costs for rice also increased due to higher fuel prices,” it added.

Based on earlier data from the Philippine Statistics Authority (PSA), last month’s inflation rate marked the fastest acceleration in overall prices since July 2024. The PSA attributed the increase to higher transport costs, which rose 9.9 percent from a 0.3 percent decline in the previous month. Fuel prices posted steep increases, with gasoline rising 27.3 percent and diesel surging 59.5 percent.

“The factor that contributed to the higher transport inflation in March 2026 was the increase in prices following the decline in gasoline and diesel prices in February 2026," said National Statistician Dennis Mapa.

The BSP’s Monetary Board recently convened an off-cycle meeting to assess the economic impact of the Middle East conflict. The Board decided to keep interest rates steady for now, despite rising inflationary pressures, after cutting rates twice since December to support an economy weighed down by the effects of the graft scandal.

BSP Governor Eli M. Remolona Jr. said monetary policy has limited effectiveness in addressing inflation driven by supply shocks, although a rate hike remains a possibility depending on future data.

“It’s possible, of course, but if that happens, we would be forced to raise our rates in a kind of ‘catch-up’ mode. But for now, our scenario is not quite extreme, so I think we can still manage with maintaining our policy rate,” he said. “So we can do something with the downside risks to growth, but not to this kind of inflation.”

The Department of Economy, Planning and Development has outlined several scenarios amid heightened uncertainty, with its worst-case projection showing inflation reaching as high as 14.3 percent in April if crude oil prices climb to around $200 per barrel.

The BSP said it will carefully assess incoming data at its next monetary policy meeting on April 22 to determine whether further action is needed in line with its price stability mandate.