BSP projects September inflation at 6.4%–7.4%, possibly the highest since March 2023

Facts

Month-ahead forecast: on 30 September 2026 BSP said September headline inflation is likely to fall between 6.4% and 7.4%. ¹ August inflation was 6.1% (down from 6.2% in July; fourth consecutive monthly slowdown). ² An outturn at the upper end would be the highest since March 2023, when inflation was 7.6%. ³ BSP listed weather-related price increases for vegetables, fish, rice and fruit after successive tropical cyclones, higher domestic petroleum prices and peso depreciation as upward pressures, partly offset by lower meat prices and electricity rates. The Philippine Statistics Authority publishes the September figure on 6 October.

Policy baseline: at its 28 August 2026 meeting the Monetary Board raised the policy rate to 5.0% (raised from 4.75% on 28 August 2026). ⁴ It cut its 2026 average inflation forecast to 6.1% (lowered from 6.4% at the June 2026 meeting) and raised the 2027 forecast to 5.4% (raised from 4.5% at the June 2026 meeting). ⁵ Both remain above the 2–4% target. Governor Eli Remolona Jr. said inflation is "likely to peak around the fourth quarter of this year".

Analysis

If the outturn lands in this range, it would end the run of monthly slowdowns through August. Even the low end of the range, 6.4%, is above August's 6.1%, and the policy rate of 5.0% sits below current inflation, so real borrowing costs remain negative while household purchasing power keeps falling.

Across the Maritime group the gap is wide: August inflation was 3.19% in Indonesia and 1.9% in Malaysia, against 6.1% in the Philippines. Indonesian and Malaysian lenders face price pressure inside or below their central banks' comfort zones; Philippine lenders face above-target inflation through 2027 if the 2027 baseline of 5.4% holds.

For household credit the link runs through repayment capacity. Banks' consumer-loan NPL ratio was 5.49% in July (up from 5.44% in June) while consumer loans were still growing 17.1%. A food- and fuel-led inflation spike hits lower-income borrowers first, as these items take a larger share of their spending, so arrears in salary and micro loans would be expected to respond before card or auto books.

Implications

Counterpoints and uncertainties

This is a month-ahead forecast range, not an outturn: the PSA figure could land near the low end, and BSP itself expects lower meat and electricity prices to offset part of the pressure. If inflation peaks in the fourth quarter as BSP expects, the squeeze on real incomes may prove temporary.