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Philippines: BSP likely to hike inflation forecast
MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is likely to raise its inflation forecast after the growth in consumer prices blew past expectations to hit a fresh 14-year high of 8.7 percent in January from 8.1 percent in December.
During the public hearing of the Senate Committee on Banks, Financial Institutions, and Currencies for the proposed Maharlika Investment Fund, BSP Deputy Governor Francisco Dakila Jr. said the BSP may likely adjust upward its inflation target during its first rate-setting meeting today.
“As to the actual projection that would have to be announced on Thursday (today) after the Monetary Board meeting,” Dakila said.
The BSP raised its inflation forecast to 4.5 percent from 4.3 percent for 2023 but lowered its projection to 2.8 percent from 3.1 percent for 2024.
Inflation accelerated to 5.8 percent last year, exceeding the BSP’s two to four percent target range, from 3.9 percent in 2021 due to the impact of Russia’s invasion of Ukraine on global oil prices as well as the supply shocks due to COVID-19 lockdowns in China on global food prices.
Despite pronouncements made by BSP Governor Felipe Medalla and Finance Secretary Benjamin Diokno that inflation may have already peaked last December, inflation shot up to 8.7 percent in January from 8.1 percent in December.
This was the highest since the 9.1 percent recorded in November 2008.
Dakila said last month’s inflation was also higher than the 7.5 to 8.3 percent forecast range of the BSP.
As such, the BSP official said the inflation projection set by the Monetary Board last December would have to be modified to factor in the latest inflation outturn and other developments.
“The main driver is we will take the January inflation into account,” Dakila said.
Economists are divided on whether the BSP Monetary Board would deliver a softer 25-basis-point hike or maintain the pace of 50-basis-point increases after inflation blew past expectations last month.
National Treasurer Rosalia de Leon also told the committee that the government is confident that inflation would ease back to within the two to four percent target range set by the BSP by next year.
“Confident, fighting,” De Leon replied when asked if it is possible for inflation to return within the government’s target range.
The BSP is confident that inflation would ease back to within the target range by the third quarter or early in the fourth quarter of this year.
Source: https://www.philstar.com/business/2023/02/16/2245199/bsp-likely-hike-inflation-forecast