When Bangko Sentral ng Pilipinas Governor Eli M. Remolona Jr. announced the Monetary Board’s decision on Thursday to raise interest rates by 25 basis points in response to mounting pressures from the ongoing Middle East crisis, the particular word he used to describe what the rate hike — one that would remain until 2027 — would be like for the average Filipino household was “painful.”

That single word carried more weight than any basis point. For the average Juan dela Cruz juggling a mortgage, a small sari-sari store, and children in school, the BSP’s 25-basis point increase — lifting the benchmark rate back up to 4.5 percent — is not an abstract monetary policy adjustment. It is a quiet tax on daily life.

The upward fuel price spiral resulting from the Middle East crisis causes pain to nearly everyone: power-consuming households, tricycle operators absorbing higher gasoline costs, small businesses watching logistics expenses rise, squeezing the margin that was supposed to fund next quarter’s inventory.

The rate hike does not cause these fuel pressures — the Middle East conflict does. But the hike removes the cushion that might have helped these entrepreneurs weather the storm through cheaper credit.

The medium-term picture depends on one critical variable: how long the Middle East conflict will sustain elevated energy prices.

If the situation is resolved within a year or two and oil falls back to manageable ranges, the BSP can resume cutting rates — the easing cycle that began in late 2025 would merely be paused, not buried. Inflation would recede toward the 2-to-4 percent band, and the Filipino middle class would recover its footing.

But if energy prices remain stubbornly high — and the BSP’s own projection of 6.3-percent inflation for 2026 suggests this is a real risk — the next five years could see a compression of Philippine household consumption.

Real wages stagnate when nominal raises cannot outpace inflation. Aspirational spending — the weekend mall trip, the family vacation, the new appliance on installment — are all deferred.

The children of today’s middle class may find it harder to replicate their parents’ standard of living without significant income growth, a prospect that depends heavily on the broader economy continuing to generate quality jobs.

Air travel, the sector most directly tied to fuel prices, faces particular turbulence. If diesel and jet fuel remain at elevated levels, expect these surcharges to become a permanent fixture of ticket prices rather than temporary add-ons. Budget travel within the country, which exploded over the past decade, may retreat somewhat toward being a middle-class privilege rather than a broadly affordable option.

Regional travel within Asia will similarly see upward pressure on fares. The Manila-Singapore, Manila-Bangkok, and Manila-Kuala Lumpur routes are heavily used by OFWs and leisure travelers alike; higher operating costs will translate to fares that will test household discretionary budgets.

Long haul routes to the US and Europe — already expensive — will become aspirational for more Filipinos than before. Corporate travel will tighten. Family reunions with relatives abroad will require longer saving cycles.

What can the government do? Monetary policy, as BSP Governor Remolona acknowledged, cannot fix a supply-side shock. Raising rates slows domestic demand and contains inflation expectations, but it cannot conjure up cheaper oil out of a geopolitical conflict. The government’s complementary role is therefore critical.

On the immediate front, targeted fuel subsidies for public utility operators would prevent transport cost increases from cascading into every corner of the economy.

Poverty alleviation cash transfer programs should be indexed to inflation, automatically adjusting transfer amounts when price levels breach defined thresholds.

Over the medium term, the government’s most powerful tool is energy diversification. Every percentage point of electricity generation shifted from imported fossil fuels toward domestic renewables is a percentage point of insulation from the next geopolitical price spike.

The renewable energy transition is not simply an environmental agenda — it is a cost-of-living agenda and a monetary policy agenda.

A Philippines less exposed to global oil markets is a Philippines where the BSP would have more room to keep rates low and sustain growth.

None of this is painless or immediate. Rate hikes — even necessary ones — exact their toll on the most vulnerable first. Safety nets must be deployed by the government where the weight falls hardest — on poor households, small entrepreneurs, and public commuters.

For now, the central bank has done its part — monetary policy has been set. It’s the government’s turn to generate revenues, and to decide how public money will be spent to keep the country going.

We the people can only hope our leaders know what they’re doing while we keep our wits about us as we navigate the roughest waters in the days to come.