The Bangko Sentral ng Pilipinas (BSP) forecasts February inflation to hit a high of 9.3 percent or a low of 8.5 percent versus January’s actual rate of 8.7 percent amid persistent high prices.
In a statement on Tuesday, Feb. 28, the BSP said inflation could settle within this range but hopefully it will remain in the eight percent level with a relatively stronger exchange rate at P54 to P55. The government will announce the February inflation rate on March 7.
“Upward price pressures for the month are expected to emanate from higher LPG prices as well as elevated prices of key food items, such as pork, fish, egg, and sugar. Meanwhile, the lower prices for domestic petroleum, fruits and vegetables, chicken, and beef, along with the peso appreciation could contribute to easing price pressures during the month,” said the BSP.
The BSP’s Monetary Board on Feb. 16 raised the benchmark policy rate by another 50 basis points (bps) to ensure inflation will fall to below four percent by November or December this year. Since May 2022, the overnight borrowing rate has been increased by 400 bps to six percent.
“The BSP will continue to adjust its monetary policy stance as necessary to prevent the further broadening of price pressures as well as the emergence of additional second order effects,” said the BSP. It added that it will also “continue to monitor closely emerging price developments in accordance with the BSP’s price stability mandate.”
BSP Governor Felipe M. Medalla said Friday that they might raise the key rate by another 25 bps during its March 23 Monetary Board policy meeting.
The BSP will have plenty of time to respond to a possible higher or lower February inflation, however Medalla said non-monetary measures such as importation should take effect by that time. He said there are already signs that it could bring inflation lower especially with the importation of sugar and other products.
Medalla did not say if March 23 will be the last rate increase. However, while the “most likely scenario (is) maybe one more” rate increase, if the February inflation does turn out to be lower as they expect it to be, then the Monetary Board will not adjust rates higher next month, he said.
The BSP expects inflation will be closer to the two percent to four percent government target range by the last quarter of this year. The BSP’s full-year forecast is an average of 6.1 percent inflation for 2023 and 3.1 percent next year.
On a quarterly basis, the central bank forecasts inflation will average at 7.7 percent in the first six months of this year. By the third quarter, it should be at 5.4 percent. By the last quarter of the year, the BSP expects inflation to settle around 3.8 percent.
