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Philippines: BSP sees fifth straight month of lower inflation
MANILA, Philippines — Inflation likely cooled for the fifth straight month in June due to lower prices of meat and fruits as well as cheaper liquefied petroleum gas or LPG, according to the Bangko Sentral ng Pilipinas (BSP).
In a statement, the BSP said inflation ranged between 5.3 and 6.1 percent in June after easing to a 12-month low of 6.1 percent in May.
Inflation averaged 7.5 percent from January to May, still way above the BSP’s two to four percent target range.
The midpoint of the latest inflation projection of the BSP is 5.7 percent. The last time inflation fell below six percent was at 5.4 percent in May 2022.
The rise in the prices of goods and services has been easing since February after peaking at a 14-year high of 8.7 percent in January.
According to the BSP, the upward price pressures in June come from higher prices of key food items such as rice, vegetables, and fish, along with the increase in domestic oil prices and electricity rates.
The central bank also cited the depreciation of the peso as a primary source of upward price pressures in June.
“Going forward, the BSP will continue to monitor developments affecting the outlook for inflation and growth in line with its data-dependent approach to monetary policy formulation,” it said.
Amid the inflation downtrend and the robust economic growth in the first quarter, the BSP extended its prudent pause for the second straight rate-setting meetings as it kept policy rates untouched anew on June 22.
During a yearlong tightening cycle to tame inflation and stabilize the peso, the BSP raised interest rates by 425 basis points since May last year, bringing the benchmark interest rate to a 16-year high of 6.25 percent from an all-time low of two percent.
Based on its latest assessment, the BSP now expects inflation to average 5.4 percent this year due to the lower-than-expected inflation outturn in May and the lower month-ahead inflation forecast for June.
For 2024, the BSP slightly raised its inflation forecast to 2.9 percent from 2.8 percent due to the continued reopening up of the economy, resulting in stronger demand and the impact of a more hawkish US Federal Reserve that signaled more rate hikes after its recent pause.
For 2025, the BSP expects inflation to average 3.2 percent.
Outgoing BSP Governor Felipe Medalla believes inflation would ease within the two to four percent target band by October or November due to the tightening cycle undertaken by monetary authorities as well as non-monetary measures implemented by the Marcos administration.
“Our forecast is that we will have to be below two percent or very close to two percent next January. The reason for that of course is January last year was so high. In fact, we will be below four percent by October or November,” Medalla said earlier.
According to Medalla, the worst is now over for inflation after peaking at a 14-year high of 8.7 percent in January and is likely to ease below two percent by January next year due to high base effects.
Source: https://www.philstar.com/business/2023/07/01/2277756/bsp-sees-fifth-straight-month-lower-inflation