Philippine inflation may cool below 2% in January, Medalla says

PHILIPPINE headline inflation could ease early next year below the central bank’s goal of 2 per cent to 4 per cent, governor Felipe Medalla said, giving monetary authorities leeway on monetary policy.

“The most extreme will be January – we might go below 2 per cent, not because prices have dropped but because the comparative figure was much higher,” Medalla told reporters on Monday (May 29).

Inflation may be slightly lower than the midpoint of the Bangko Sentral ng Pilipinas’ (BSP) target in 2024, he added.

That would be in line with BSP’s earlier forecast that headline inflation will likely register below 4 per cent in the latter part of 2023, and would average within the goal range next year.

Overall inflation has been easing after touching a 14-year high in January.

Medalla also sees inflation in May to be “significantly lower” year on year, but the month-on-month figure may be higher.

The governor said supply-driven shocks that drove inflation higher had eased, including the impact on global agricultural products and inputs from the Ukraine-Russia conflict and domestic factors. 

Medalla this month signalled an extended pause on interest rates amid easing inflation and a slowing economy after halting its fastest monetary tightening in two decades. 

Last week, the central bank chief reiterated that he is ready to cut the reserve requirement for lenders when pandemic relief measures expire next month.

The 73-year-old governor, whose term is set to end by Jul 3, said he ’s not thinking about a potential reappointment. “Of course, it’s a great honour to be governor of the central bank,” he said. BLOOMBERG