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Think tank lowers Philippines inflation forecast
MANILA, Philippines — New York-based GlobalSource Partners now expects inflation to settle within the 5.5 to six percent range, after easing to an eight-month low of 6.6 percent in April.
GlobalSource country analyst for the Philippines Romeo Bernardo said the latest inflation projection for 2023 was lower than the think tank’s forecast three months ago.
“Given the faster than expected deceleration in the headline rate, we now expect the average inflation rate for the year to fall below the 6.5 percent level we forecasted three months ago, likely within the 5.5 percent to six percent range,” Bernardo said.
In a commentary titled “April Inflation Below Expectations,” the former undersecretary of the Department of Finance said food prices continued to fall for the third straight month, pulling down the headline inflation rate to 6.6 percent in April from a peak of 8.7 percent in January.
This was the slowest increase in consumer prices since the 6.3 percent recorded in August last year.
Aside from food prices, which partly reflects seasonal factors, Bernardo said lower electricity rates for the month also contributed to disinflation.
Stripping out the volatile food and energy prices, Bernardo said core inflation also softened but remained elevated at 7.9 percent in April from eight percent in March.
According to Bernardo, this points to continuing demand side pressures.
Despite the decision of the US Federal Reserve to raise interest rates by another 25 basis points last week, Bernardo said the inflation downtrend should lessen pressure on the Bangko Sentral ng Pilipinas (BSP) to do a matching increase.
“With the Fed hinting of a pause in rate hikes, the Monetary Board may find the over 100-bp interest rate differential adequate for now and opt to keep its set of policy rates steady when it meets on May 18,” Bernardo said.
Since its interest rate liftoff in May last year, the BSP has raised key policy rates by 425 basis points, bringing the overnight reverse repurchase rate to a 16-year high of 6.25 percent compared with the five to 5.25 percent US Fed funds target rate.
For his part, Bank of the Philippine Islands lead economist Jun Neri said the BSP’s Monetary Board may justify a pause in its rate hikes considering the current path of headline inflation.
Source: https://www.philstar.com/business/2023/05/08/2264530/think-tank-lowers-philippines-inflation-forecast