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Godzilla El Niño is wreaking havoc with Philippine central bank's inflation forecasts
Bangko Sentral ng Pilipinas Governor Eli Remolona says the central bank is stress-testing policy for an extreme “Godzilla” El Niño layered on top of a prolonged oil shock, with the worst expected to hit inflation from November through February. Philippine inflation has already accelerated to 7.2% in September and rice prices are rising sharply; the BSP previously hiked to 5.0% in August and market commentary expects further hikes.
Bangko Sentral ng Pilipinas says it is now planning monetary policy around adverse “scenarios” that include both oil-price shocks and an extreme El Niño outcome it called a “Godzilla” event. Governor Eli Remolona described how the BSP models an ordinary El Niño alongside a far worse case, and said the larger price impact is expected to materialise from November through February. The emphasis is on preparing for inflation volatility while keeping price stability as the central objective.
The backdrop is already adverse. Philippine inflation accelerated to 7.2% in September from 6.1% in August, with rice prices up 18%, according to the Philippine Statistics Authority. The article links the risk to food supply pressures that could be amplified by drought, noting warnings of a potential fresh shortfall in domestic agriculture supply. It also points to external pressures: the UN Food and Agriculture Organization has raised its rice price index for six consecutive months to a 20-month high.
In August, the BSP lifted its benchmark rate by 25 basis points to 5%, aiming to bring inflation under control. The piece cites an HSBC economist expecting another 25 basis point hike next week to 5.25% and a further same-sized move in December. What to watch next is how the BSP updates or refines its “Godzilla” scenario assumptions as the weather-related window approaches, and whether food and oil-linked inflation risks become more persistent in the data.
Why this matters for FX
A plausible worsening of food and energy inflation directly affects Philippine rate expectations and the currency’s inflation-risk premium. The scenario-based communication also signals how the BSP is framing the balance between price stability and volatility from external shocks, which can influence PHP funding conditions and regional FX cross-currents.