The Bangko Sentral ng Pilipinas (BSP) projects April headline inflation to settle within 5.6 to 6.4 percent, marking another monthly surge in overall prices as spillover effects of the oil shock continue to spread across more goods and services.

In a Thursday statement, the central bank attributed the expected increase to “upward price pressures from significantly higher domestic petroleum prices, rising prices of key food items such as rice, fish, and meat, increased electricity charges, and peso depreciation,” noting that lower vegetable and fruit prices may partly offset these pressures.

March headline inflation rose to 4.1 percent, driven by elevated fuel prices and transport costs stemming from the Middle East conflict, which escalated at the beginning of the month following the US invasion of Iran.

Domestically, pump prices have seen some rollbacks due to government intervention, with diesel bearing the brunt of mandated price cuts—down more than P20 per liter over the past two weeks. However, with parties still unable to reach a peace agreement, the Strait of Hormuz remains under US blockade, keeping oil prices elevated—around 60 percent higher than pre-conflict levels.

The BSP now projects full-year inflation at 6.3 percent, well above its 2 to 4 percent target range. If the April forecast holds, inflation could increase by at least 1.5 percentage points, with a possible rise of up to 2.3 percentage points—signaling broader price pressures across the economy.

The elevated inflation outlook played a key role in the central bank’s recent decision to raise interest rates by 25 basis points.

“The reason is clear: the inflation outlook has deteriorated amid the ongoing conflict in the Middle East. Higher oil and fertilizer prices are expected to spill over into food prices and services,” said BSP Governor Eli M. Remolona Jr..

Remolona earlier noted that the depreciation of the local currency—which has hit record lows eight times since the conflict escalated—has yet to significantly feed into inflation. BSP studies estimate that a 1 percent peso depreciation translates to about a 0.05 to 0.15 percentage point increase in inflation.

In a Wednesday episode of the DAILY TRIBUNE program Straight Talk, Michael Ricafort, chief economist of Rizal Commercial Banking Corporation (RCBC), said the peso has depreciated by about 7 percent since the start of the conflict, indicating rising inflationary pressures from currency weakness.

“Since the start of the war, from P57.66, the peso has already depreciated by close to 7 percent. So, meaning to say, the peso is one of the worst performers among Asian countries,” he said, noting the dollar has also appreciated by about 6 percent over the same period.

The peso breached the P61-per-US-dollar level for the first time last Tuesday as investors flocked to the dollar as a safe-haven asset amid the absence of a concrete peace deal. Elevated oil prices—despite a temporary ceasefire extension announced by US President Donald Trump—have continued to pressure the currency, which traded around the P57 level at end-February prior to the conflict’s escalation.

The BSP said it will continue to monitor developments in the Middle East to fulfill its primary mandate of price stability. Remolona also signaled a more hawkish stance on further rate hikes should spillover effects intensify.

However, he clarified that the BSP does not use interest rates to support the peso, noting that intervention is limited to smoothing excessive volatility.

“We don’t use policy rates to support the peso. We try to let the peso find its own level. We intervene just to smooth volatility and swings. But the market seems to know what it’s doing—we mostly leave it alone,” he said.