Inflation surges to near 4-year high in October

By Katherine K. Chan, Reporter

HEADLINE INFLATION quickened to the fastest pace in nearly four years in October as high energy costs spilled over to transport, utilities, and restaurant services, the Philippine Statistics Authority (PSA) said on Thursday.

The headline clip, as measured by the consumer price index, accelerated to 7.8% from 7.2% in September and 1.7% a year ago. This was the highest since February 2023’s 8.6%.

It also marked this year’s peak so far, exceeding the 7.2% recorded in April and September.

October inflation outpaced the 7.6% median estimate of 22 analysts in a BusinessWorld poll, but was within the Bangko Sentral ng Pilipinas’ (BSP) 7.1%-8.1% forecast.

The headline clip remained above the BSP’s 3% target for an eighth straight month, bringing the year-to-date average to 5.6%.

National Statistician Claire Dennis S. Mapa said October inflation heated up due to faster inflation in transport, housing and utilities, as well as restaurants and accommodation services.

Transport inflation sizzled to a six-month high of 20.1% last month from 14.6% in September. Of this, gasoline inflation quickened to 51.1% (from 40.9%), while diesel inflation rose to 62.4% (from 61.3%).

Oil price adjustments were mixed in October. The price of gasoline fell by up to P1.11 a liter and diesel by P0.52 a liter, while kerosene rose by as much as P4.57 a liter.   

As of end-October, the per liter price of gasoline ranged between P75.10 and P101.10, diesel between P88 and P102.50, and kerosene between P116 and P145.34 in Metro Manila and nearby areas.

Mr. Mapa likewise noted that the public transport fare hike imposed in late September drove up inflation for other passenger transport by road to an over three-year high of 11.6% in October from 5.4% in September.

“Our October inflation rate was really affected by the transport fare hike,” he told a press briefing. “It did not have an impact (in September) because it was implemented only around the last two days of September, but it really had an impact this October… This will continue into November and December because of the base effect.”

Meanwhile, inflation for housing, water, electricity, gas and other fuels came in faster at 9.3% in October from 8.4% a month earlier.

FOOD PRICES
Dining out also became more expensive last month, with inflation for restaurants and accommodation services picking up to 7.7% from 7% in September.

Mr. Mapa noted that this was largely due to second-round effects of elevated costs of energy, food, and raw materials, as well as the recent minimum wage hike in the National Capital Region (NCR).

On Sept. 26, the minimum wage in NCR was raised by P60, bringing nonagricultural workers’ daily pay to P755 and those for agricultural workers and employees of retail, service, and small manufacturing establishments to P718.

On the other hand, food inflation slowed in October, partly offsetting the increases in other commodity groups. Inflation for the heavily weighted food and nonalcoholic beverages index eased to 6.1% in October from 6.7% in the prior month.

The Department of Economy, Planning, and Development said in a statement that improved food supply helped temper price pressures in October. Favorable weather conditions helped cool down food inflation during the month, it added.

Still, Mr. Mapa noted that the strong El Niño has already affected local palay (unmilled rice) production, with rice inflation picking up to 20.7% in October from 20.3% in September.

Based on PSA data, the average cost of local regular milled rice jumped by 24.17% year on year to P49.87 per kilo in October from P40.16 per kilo, while well-milled rice rose by 18.71% annually to P56.19 per kilo from P47.34 per kilo.

“As for the impact of El Niño, this will now feed through to food prices. That is why we are seeing food prices — while they slowed as a whole… some items increased, particularly rice,” Mr. Mapa said.

“Our palay production declined in the third quarter of 2026, and one of the major reasons for this is, of course, the weather, specifically El Niño,” he added.

IMPACT OF WEAK PESO
The Philippines also saw higher import-driven inflation last month as the weak peso versus the dollar drove up the cost of imported goods, the PSA noted.

According to Mr. Mapa, the exchange rate pass-through was most evident in energy items, particularly diesel, gasoline, liquefied petroleum gas (LPG), and food, especially rice and cereal products.

“Of course, our exchange rate and the prices of energy commodities in the global market has an impact (on inflation). But these are the sources — gasoline, diesel, and LPG. So, we see that this is where the impact of the peso’s weakening comes in,” Mr. Mapa said in mixed English and Filipino.

“The only question now is whether the effect is automatic or whether there is a lag. But right now, we are seeing that there are increases in the prices of energy items in our consumer price basket,” he added.

From the P58- to P59-a-dollar level prewar, the local unit breached the P64 handle in October after breaking multiple all-time lows. It hit a historic trough of P64.17 against the greenback on Oct. 27, marking the seventh straight trading day that it finished at a record low.   

The peso averaged P63.0996 per dollar in October, 8.24% or P4.8012 weaker than its P58.2984 average a year ago, BSP data showed.

The Philippines purchases imported goods in US dollars. This means when the peso depreciates against the greenback, it costs more local currency to fund the country’s imports.

The country is a net oil importer and relies heavily on Middle East crude, which accounts for at least 90% of its total oil imports. It also imports 30%-35% of its rice consumption, with Vietnam as its top supplier.

Meanwhile, core inflation, which excludes volatile food and energy prices, picked up to 5.4% in October from the revised 4.8% in September and 2.5% in the prior year.

This was the fastest core print since 5.9% in September 2023.

Inflation in NCR also quickened to 5.9% from the revised 5.3% in September and 2.9% a year earlier.

Outside NCR, inflation accelerated to 8.2% from 7.6% in the prior month and 1.3% in October 2025.

On the other hand, inflation for the bottom 30% of income households surged to a nearly four-year high of 9.5% in October from 9% in September and -0.4% last year. This brought average inflation to 6.8% as of October.

ANOTHER HIKE IN DECEMBER?
The national statistician noted that still elevated global oil prices and the strong El Niño continue to pose threats to inflation in the coming months.

“Our challenges will persist in the coming months, particularly for energy commodities, food prices, and, of course, other road passenger transport as well as other inputs,” Mr. Mapa said.

The BSP said the October inflation print is consistent with their projection that inflation is likely to remain elevated in the coming months.

“The BSP will remain vigilant and guided by incoming data. It will continue to assess the impact of latest developments in the Middle East and ongoing El Niño conditions on the outlook for inflation and growth,” it said.

These pressures, according to economists, could prompt the BSP to extend its tightening cycle until yearend, especially with core inflation picking up.

In a note, Alyssa Nuñez, lead economist at BDO Unibank’s Wealth Research Office, said the hotter core inflation means “prices are rising across more of the basket.”

This, alongside the possibility that inflation could accelerate further in the last two months of the year, makes a quarter-point hike by the BSP likely in December, she added.

Last month, the central bank raised its key policy rate for a fourth straight meeting by a larger-than-expected 50 basis points (bps) to a nearly two-year high of 5.5%. This brought its cumulative hikes since April to 125 bps.

Meanwhile, Metropolitan Bank and Trust Co. Chief Economist Nicholas Antonio T. Mapa also sees the BSP delivering a fifth consecutive hike as price pressures worsen.

“Energy and food items remain the culprits but accelerating core inflation suggests price pressures are broadening,” he said on X. “Sounds like the Bangko Sentral ng Pilipinas (will) likely (be) forced to hike again in December.”

Chinabank Research likewise noted that another 25-bp increase remains on the BSP’s table as headline inflation could top 8% in November while core inflation is likely to stay above 5% until the first quarter of 2027.

“This keeps the door open for another 25-bp BSP rate hike in December to help contain the broader spillover from supply-side price pressures,” it added. “However, much will depend on the Q3 GDP (gross domestic product) data, as further monetary tightening could further weigh on the already slowing economy.”

On the other hand, ING Bank N.V. Regional Head of Research for Asia-Pacific Deepali Bhargava said the BSP will likely resort to a less aggressive tightening in December if the peso continues to strengthen and the third-quarter growth remains sluggish.

“If oil prices continue to ease and 3Q GDP growth prints weak, we think the case for another jumbo hike is limited,” Ms. Bhargava said in a report.

“That said, a 25-bp rate hike in December remains our base case, as the BSP is likely to maintain a cautious tightening bias and stay ahead of potential inflation risks and sticky core inflation,” she added.

The PSA will release the third-quarter GDP report on Nov. 9, while the Monetary Board will hold its last policy review this year on Dec. 17.