Philippines – BSP: Inflation in August likely at 5.9 to 6.7%

MANILA, Philippines — Inflation for August likely settled within the range of 5.9 to 6.7 percent after accelerating to 6.4 percent in July from 6.1 percent in June, according to the Bangko Sentral ng Pilipinas (BSP).

The central bank said inflation last month was driven by the continued increase in key food prices.

However, upside risks were likely offset in part by the decline in global oil prices, the reduction in electricity rates, lower meat and fish prices and appreciation of the peso against the dollar.

“Looking ahead, the BSP will continue to monitor closely emerging price developments to enable timely intervention that could prevent further broadening of price pressures, consistent with BSP’s mandate of price stability conducive to sustainable economic growth,” the regulator said.

Inflation averaged 4.7 percent in the first seven months, exceeding the BSP’s two to four percent target range, after quickening to 6.4 percent in July – the highest since the 6.9 percent recorded in October 2018.

Based on the assessment of the Monetary Board on Aug. 18, inflation is now expected to average 5.4 instead of five percent for this year.

However, the central bank slashed its inflation projections to four percent for 2023 and to 3.2 percent for 2024 as the series of rate hikes has succeeded in anchoring inflation expectations.

BSP Governor Felipe Medalla earlier said inflation is likely to peak either in September, October or November and would return to the midpoint of the two to four percent target range by the middle of next year.

“Our forecast is that headline inflation will still increase and will probably peak on the 10th or 11th month of the year,” the BSP chief said earlier, adding that it would remain high during the first half of next year before easing closer to three percent in the second half.

The central bank has so far raised interest rates by 175 basis points over the last four months. This brought the overnight reverse repurchase rate to 3.75 percent from an all-time low of two percent.

To curb rising inflationary pressures, the BSP started its interest rate liftoff with a 25-basis-point hike on May 19 followed by another 25-basis-point increase on June 23.

During a surprise off-cycle rate-setting meeting last July 14, the BSP delivered a huge 75-basis-point hike followed by another 50 basis points on Aug. 18.