The country’s inflation could drop below seven percent for the month of April because of the stable exchange rate, lower power costs and rollback in the prices of petroleum products, said the central bank. On Friday, April 28, the Bangko Sentral ng Pilipinas (BSP) announced an April consumer price index (CPI) forecast range of as low as 6.3 percent to a high of 7.1 percent versus actual March CPI of 7.6 percent. “The BSP projects April 2023 inflation to settle within the range of 6.3 to 7.1 percent,” said the BSP on Friday, April 28, citing “lower electricity rates, the decline in prices of fish and vegetables, and rollback in LPG prices” which “contributed to easing price pressures during the month.” However, the BSP also noted that inflation could hit the high end of the forecast at 7.1 percent if the peso depreciates vis-à-vis the US dollar since the spot market has been ranging between P55 and P56 for the last two weeks. “Meanwhile, upward price pressures are expected to emanate from higher domestic petroleum prices, increased rice and meat prices, and peso depreciation,” said the BSP. If April CPI does decline compared to March’s 7.6 percent, this will be the third time in a row that inflation month-on-month has decelerated. The BSP normally forecasts headline inflation but not core inflation which has been rising. Core inflation excludes volatile items that spikes CPI such as oil-related commodities. The government will release the April inflation number on May 5. The BSP reiterated that it “remains prepared to respond appropriately to continuing inflation risks in line with its data-dependent approach to monetary policy formulation.” BSP Governor Felipe M. Medalla has already signalled to the market that if April CPI proves to be the third consecutive negative inflation month-on-month, then the Monetary Board could be convinced to pause its policy rate increases when next it meets on May 18 for its monetary policy decision. So far, the BSP has raised its benchmark rate by a cumulative 425 basis points (bps) since May 19, 2022. As of March 23 this year, the key rate stands at 6.25 percent. Last April 13, Medalla specifically communicated to the market that BSP may even cut the policy rate if inflation will continue to decline for six straight months. In this case, if CPI month-on-month will continuously decelerate until July or August. The January inflation of 8.7 percent could be the peak already. The CPI dipped to 8.6 percent in February and more sharply to 7.6 percent in March. “If that continues then we have good reason to pause and I think if April is also on a similar path then there’s a (very good reason) for a pause,” said Medalla earlier, adding that “if we have four or five more of that, we can even talk about a cut.” Medalla seems more certain that the Monetary Board will likely decide to take a break next month, and pause from nine straight rate hikes in a row with the gradual easing of inflation pressures. On May 18, the Monetary Board is also expected to revise current inflation forecasts of six percent for 2023 and 2.9 percent for 2024. Medalla said the new 2023 inflation forecast could even be below six percent. Meanwhile for 2024, the BSP chief remains confident that inflation is going to be very close to the midpoint target and may even be below two percent in some months next year. Medalla has also said he’s more assured of the exchange rate stability, another factor that will convince BSP to pause in its year-long tightening cycle. Barring any more external shocks, the BSP expects CPI will fall to within the to percent to four percent target range by November or December this year. As of the first quarter, inflation averaged at 8.3 percent. Based on the BSP’s quarterly forecasts, it expects inflation will average at 7.7 percent in the first six months of this year. By the third quarter, it should be about 5.4 percent and 3.8 percent in the last quarter of the year.