Headline inflation accelerated to 7.2% year-on-year in September, faster than the 6.1% recorded in August. The latest print is also faster than the 6.8% median estimate in a Bloomberg survey but is within the Bangko Sentral ng Pilipinas (BSP)’s 6.4%-7.4% forecast for the month.

Key points  

• The September number matches April inflation, which is the highest year-to-date. This also brings year-to-date inflation for the first nine months to 5.4%, above the BSP’s 3%±1% target for the full year.  
• The main drivers of headline inflation were food (led by rice, vegetables, and fish), housing, electricity, gas and other fuels (led by electricity and rentals), and transport (led by gasoline and diesel).
• Core inflation also remained above 4% for the fifth straight month, implying second-round effects of elevated oil prices on the broader commodity basket.  
  
   

What’s next

• In addition to the impact of elevated fuel prices, the anticipated impact of the super El Niño and the recently approved wage and transport hikes imply that inflationary pressure is tilted to the upside.  
• Given above-target inflation this year, Metrobank forecasts that the BSP will deliver two more rate hikes this year to bring the policy rate to 5.50% by end-2026 before reversing the hikes with a cumulative 75 basis points (bp) in rate cuts next year, bringing the policy rate to 4.75% by end-2027.
• Local fixed income. Staying tactical and picking up belly on dips may be considered. Duration exposure may be avoided, as high domestic inflation, a strong USD, and elevated US Treasury yields keep pressure on local bonds.  
• Local Equities. Maintaining a defensive stance and remaining selective may be considered—favoring large-cap, high-dividend, and consumer-oriented sectors while awaiting greater clarity on inflation and policy direction.
• Currency. A slight peso appreciation toward the end of the year is possible on seasonal dollar inflows, although this may be capped by a strong USD.