The 7.2% April headline inflation print reported by the Philippine Statistics Authority (PSA) may prompt the central bank to preemptively raise interest rates before inflation rises beyond control.

In a Tuesday commentary, Bank of the Philippine Islands Lead Economist Emilio S. Neri Jr. said the accelerated April inflation figure—the highest in three years—raises the likelihood that the Bangko Sentral ng Pilipinas (BSP) could enact an off-cycle rate hike ahead of the Monetary Board’s next meeting in June to address economic pressures stemming from the energy emergency.

“The latest inflation print, which exceeded both market and BSP forecasts, has significantly raised the likelihood of an off-cycle rate hike, especially with the next BSP meeting still weeks away,” he said.

“Should the central bank opt to wait, the gap between inflation and the policy rate could widen further, resulting in negative real interest rates that may exert pressure on the peso.”

The PSA reported that headline inflation surged to 7.2% in April—up 3.1 percentage points from March and four times higher than the end-2025 level of 1.8%. Neri attributed the sharp increase primarily to energy and food-related components, with transport costs rising 21.4% and rice prices up 13.7% year-on-year amid the ongoing conflict.

The BSP’s Monetary Board, which serves as its policymaking body, approved a rate hike on 23 April in response to a deteriorating inflation outlook during the national energy emergency. It had previously convened off-cycle in March to assess the conflict’s impact, ultimately deciding to keep rates steady at the time due to limited spillover effects.

A rate hike aims to control inflation by encouraging savings through higher interest rates, which reduces consumption, weakens demand, and helps temper price increases. However, with consumption accounting for roughly 73% of the country’s gross domestic product, higher rates may also dampen economic growth—already below target last year amid the flood control scandal.

With local fuel prices elevated and spillover effects into other goods and services looming, BSP Governor Eli Remolona Jr. has adopted a more hawkish stance on further tightening.

“We stay vigilant and we’ll do as many hikes as necessary. We’re being proactive—we’re staying ahead of the curve,” he said. “Normally, it would be a succession of small rate hikes, but it will depend on how large the spillover effects are, so we just have to watch the data and measure expectations.”

Neri added that the BSP may consider a larger-than-usual increase beyond 25 basis points, noting that a more aggressive response could be necessary to rein in inflation expectations. He also warned that inflation could reach double digits by the fourth quarter if oil prices remain elevated for a prolonged period.

“While tighter monetary policy could weigh on growth by raising the cost of financing capital expenditures, the economic damage from persistently elevated inflation may be more severe, justifying a more aggressive policy response,” he said.