By Katherine K. Chan, Reporter

Headline inflation in the Philippines quickened to its fastest pace in nearly four years in October as elevated energy costs spilled over into transport, utilities, and restaurant services, the Philippine Statistics Authority (PSA) said on Thursday.

The headline rate, as measured by the consumer price index, accelerated to 7.8% in October from 7.2% in September and 1.7% a year earlier. The October figure was the highest since the 8.6% recorded in February 2023 and marked this year's peak so far, exceeding the 7.2% print in both April and September.

The reading outpaced the 7.6% median estimate of 22 analysts in a BusinessWorld poll but landed within the Bangko Sentral ng Pilipinas' (BSP) forecast range of 7.1% to 8.1%. It also stayed above the BSP's 3% target — the midpoint of the central bank's 2% to 4% tolerance band — for the 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 price increases in transport; housing and utilities; and restaurants and accommodation services.

Transport Costs Lead the Increase

Transport inflation climbed to a six-month high of 20.1% in October from 14.6% in September. Within the category, gasoline inflation quickened to 51.1% from 40.9%, while diesel inflation rose to 62.4% from 61.3%.

Oil price adjustments were mixed during the month. Pump prices of gasoline fell by up to P1.11 per liter and diesel by P0.52 per liter, while kerosene rose by as much as P4.57 per liter. As of end-October, per-liter prices in Metro Manila and nearby areas ranged between P75.10 and P101.10 for gasoline, P88 and P102.50 for diesel, and P116 and P145.34 for kerosene.

Mr. Mapa likewise noted that the public transport fare hike imposed in late September drove 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."

The base effect refers to how year-on-year price comparisons are shaped by conditions in the year-earlier period.

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 energy, food, and raw material costs, as well as the recent minimum wage hike in the National Capital Region (NCR).

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

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

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

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. El Niño is a recurring climate pattern typically associated with drier conditions and reduced rainfall in the Philippines, which can weigh on crop yields.

Based on PSA data, the average cost of local regular milled rice jumped 24.17% year on year to P49.87 per kilo in October from P40.16 per kilo, while well-milled rice rose 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 the Weaker Peso

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

According to Mr. Mapa, exchange rate pass-through was most evident in energy items — particularly diesel, gasoline, and liquefied petroleum gas (LPG) — as well as 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," he 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-per-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 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 earlier, BSP data showed.

The Philippines purchases imported goods in US dollars, meaning peso depreciation makes it costlier in local currency terms to fund the country's imports. The Philippines 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% to 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% a year earlier. This was the fastest core print since the 5.9% recorded in September 2023.

Inflation in the NCR quickened to 5.9% from the revised 5.3% in September and 2.9% a year earlier. Outside the capital region, inflation accelerated to 8.2% from 7.6% in the prior month and 1.3% in October 2025.

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, bringing their average inflation to 6.8% as of October. The PSA publishes this series separately because the consumption baskets of lower-income households are weighted more heavily toward staples such as food and fuel.

Another Rate Hike in December?

Mr. Mapa 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," he said.

The BSP said the October inflation print is consistent with its 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.

According to economists, these pressures could prompt the BSP to extend its tightening cycle until year-end, 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%, bringing its cumulative hikes since April to 125 bps. The policy rate serves as the benchmark for banks' lending and deposit rates, so each adjustment feeds into the cost of borrowing for households and businesses.

Metropolitan Bank and Trust Co. Chief Economist Nicholas Antonio T. Mapa likewise 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 similarly 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 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 of the year on Dec. 17.

This article was originally published by BusinessWorld Online. Source: BusinessWorld Online