Consumer price movements may not stabilize soon due to twin threats that could keep inflation elevated, according to New York-based economic think tank GlobalSource Partners Inc.

GlobalSource economist Diwa Guinigundo warned that the Philippines is battling two simultaneous price shocks: the record-high minimum wage hike in Metro Manila, and renewed supply shocks resulting from the re-escalation of tensions between the United States (US) and Iran.

Guinigundo, a former Bangko Sentral ng Pilipinas (BSP) deputy governor, noted in a July 20 commentary that the minimum wage increase in National Capital Region (NCR) was “larger than expected,” while volatile oil markets are compounded by a weaker Philippine peso.

These headwinds, he said, could derail the government’s target of bringing inflation back to more normal levels.

As such, the BSP faces the challenge of “maintaining credible monetary policy and keeping inflation expectations well anchored while addressing the structural sources of inflation through broader government action.”

To date, the BSP has raised key borrowing costs by a cumulative 50 basis points (bps) since the flare-up of the war in the Middle East. These tightening measures have brought the benchmark policy rate to 4.75 percent.

BSP Governor Eli M. Remolona Jr. earlier admitted that the monetary authority was caught off guard by the scale of the NCR wage adjustment.

Remolona—who described the shock as “unusual”—said the Monetary Board (MB) will assess incoming economic data at its August policy review before determining whether further front-loaded tightening is needed to anchor inflation expectations.

While the price pressures from the wage adjustment are significant, Guinigundo said the development does not necessarily warrant an outsized monetary response.

External price pressures have since filtered through to domestic retail prices, pushing headline inflation to a peak of 7.2 percent in April before easing to 6.8 percent in May and further to 6.4 percent in June.

Headline inflation is expected to average 6.4 percent this year, according to the BSP, which warned that it may return to the target range only in about two years.

Domestically, Guinigundo noted that the NCR wage adjustment—the first tranche of which takes effect this July—“substantially exceeded” the BSP’s earlier assumptions.

Instead of the six-percent increase embedded in previous projections, the approved ₱85 daily wage hike represents a 12-percent increase from the current minimum wage.

Since Metro Manila accounts for the largest share of the country’s gross domestic product (GDP), Guinigundo said that “developments in its labor market inevitably carry national macroeconomic implications.”

He added that the BSP estimates the full ₱85 wage adjustment could add roughly 0.4 percentage point (ppt) to “inflation through its direct or first-round effects alone.”

Further, there is concern that higher production costs could trigger a “wage-price spiral,” where adjustments become “mutually reinforcing” and difficult to break.

This pressure comes while inflation is already “more entrenched,” with headline inflation averaging 4.8 percent in the first half of 2026.

For the poorest Filipino households, inflation averaged 5.5 percent during the period, highlighting the heavier burden borne by lower-income families.

With the peso projected to weaken to as low as a record ₱63 per US dollar due to external pressures, a sustained depreciation would raise the “peso cost of imported goods, particularly fuel and food,” Guinigundo said.