Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said the BSP is projecting a 4.3 percent inflation for July, up from the previous month’s actual 4.1 percent.

The 4.3 percent is the point inflation projection for the 3.9 percent to 4.7 percent forecast range for this month.

The BSP’s Department of Economic Research said the depreciating peso, higher oil and electricity prices could pull inflation rate up to as high as 4.7 percent.

“The higher prices of domestic petroleum products and key food items along with the upward adjustment in Meralco electricity rates and a weaker peso are the main sources of upward price pressures for the monthm,” said the BSP.

ING Bank senior economist Nicholas Mapa said inflation level will stay above two-four percent BSP target for this year but he still does not see the Monetary Board reacting by adjusting the policy rate.

Mapa said in the months ahead, inflation will remain elevated but the BSP “will likely look past the breach given its supply side nature while providing the economy as much support as it can muster amidst the current protracted economic downturn.”

“We now expect inflation to breach the upper end of the BSP target as the peso remains weak and persistent food inflation keeps price pressures elevated (but) despite the projected inflation breach, we do not expect BSP to recalibrate rates in the near term with Governor Diokno likely looking past the cost push driven acceleration,” said Mapa, adding that “hiking policy rates at a time where GDP is expected to fall below the official target of six-seven percent will likely derail the fragile growth prospects for the country.”

A policy tightening will have zero impact on “counteracting the rise in global crude oil or the cost of canned goods, thereby rendering recalibration of rates useless at this point, if not to slow growth and exact even more hardship for country,” Mapa also said.

Based on the BSP’s latest Private Sector Economists’ Inflation Forecasts, analysts expect a 4.1 percent mean inflation forecast for 2021 which was lower from its previous (March) survey of 4.3 percent. For next year and in 2023, they expect 3.2 percent and 3.1 percent, respectively.

Last June 24, for the Monetary Board’s fourth policy meeting, the BSP maintained its key rate at two percent, the lowest level for the policy rate. The BSP also revised its inflation forecast for 2021 to four percent from its previous (May 13) projection of 3.9 percent. For 2022, the forecast is three percent, also higher than earlier estimate of 2.9 percent. For the first time, the BSP announced a 2023 inflation projection of three percent.