Philippines: No reprieve as BSP sees February inflation breaching 9%

MANILA, Philippines — The Bangko Sentral ng Pilipinas on Tuesday said there are chances that brutally-high inflation sizzled beyond 9% in February, which could give it more reason to tighten monetary policy.

In a statement on Tuesday, the BSP said inflation likely quickened between 8.5 to 9.3% in February. If the upper range is realized, consumer price growth would be faster compared to the 8.7% outturn in the preceding month. 

Inflation’s ascent began in 2022, as various headwinds such as supply chain disruptions, expensive fuel prices, and a weak peso weakened the public’s purchasing power. By the end of 2022, inflation has not peaked, contrary to what experts had anticipated, as a reopened Philippine economy fueled demand. 

The central bank expected inflation to ease this year, but consumer price growth could still maintain its trajectory towards the end of 2023 due to global headwinds. 

The BSP said prices of food items, such as pork, fish, egg, and sugar and liquefied petroleum gas, likely rose in February. 

On the other hand, retreating prices of domestic petrol, fruits and vegetables, chicken, and beef, coupled with the peso’s strength, could ease inflationary pressures in this month.

The central bank has injected 400 basis points into its key policy rate, its most recent in February, as it began tightening in May 2022. The benchmark rate currently stood at 6%.

Central banks, like the BSP, use rate hikes to rein in demand pressures that are stoking price growth. The higher interest rates work by prompting consumers and businesses to think twice about borrowing money. This, in turn, lessens the money that’s circulating in the economy and chasing a limited supply of consumer items.

“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,” the statement read.

“The BSP will also continue to monitor closely emerging price developments in accordance with the BSP’s price stability mandate,” the BSP added.