The Philippine central bank is preparing for extreme weather and prolonged oil shocks as it battles to bring inflation under control from a three-year peak.
Governor Eli Remolona of Bangko Sentral ng Pilipinas says the bank now sets monetary policy using multiple scenarios, factoring in both oil price levels and the severity of the approaching El Niño weather event.
“We have the regular, ordinary El Niño, which is bad, and then we have the Godzilla El Niño, which is really, really bad,” Remolona said Wednesday on a panel at the IMF and World Bank annual meetings in Bangkok.
Remolona warned that the worst of El Niño’s impact on prices has not yet arrived, with effects expected to strike from November through February, adding significant uncertainty to the bank’s outlook.
“We’re holding our breath,” he said, “but we have to be prepared for the worst.”
Philippine inflation accelerated sharply to 7.2% in September from 6.1% in August, with rice prices surging 18% according to the Philippine Statistics Authority, underlining the scale of the challenge facing policymakers.
The Philippines is the world’s biggest rice importer, leaving the economy acutely exposed to food supply disruptions that could be worsened by an intensifying drought linked to El Niño conditions.
Agriculture Secretary Francisco Tiu Laurel has warned that a fresh drought could squeeze domestic supply further, with larger Philippine purchases potentially adding significant new demand pressure to an already strained global market.
Export curbs across major producing nations have compounded the problem, and the UN Food and Agriculture Organization has raised its rice price index for six consecutive months to a 20-month high.
The Bangko Sentral ng Pilipinas lifted its benchmark interest rate by 25 basis points to 5% in August in an effort to contain surging price pressures across the Southeast Asian economy.
Aris Dacanay, senior ASEAN economist at HSBC Bank, said in a note Wednesday that the BSP should deliver another quarter-percentage-point hike to 5.25%, followed by a further same-sized increase in December.
The back-to-back rate rises would mark an aggressive tightening cycle for an economy already navigating severe weather risk, elevated global commodity prices, and persistent food inflation driven by supply-side pressures beyond the central bank’s direct control.
Maintaining price stability remains the central bank’s stated priority as policymakers attempt to balance growth risks against the threat of entrenched inflation heading into the first months of 2026.