The Bangko Sentral ng Pilipinas (BSP) forecasts a high of five percent inflation rate for the month of April from four percent in March on the back of increased power, fuel and meat prices.
The BSP has a forecast range of 4.2 percent to five percent for April inflation.
Last month’s higher inflation rate was a steep climb from February’s three percent rate, mainly due to the impact of the Russia-Ukraine war on oil and non-oil commodity international prices. The geopolitical tensions, which will affect global growth, started on Feb. 24.
BSP Governor Benjamin E. Diokno on Friday, April 29, citing Department of Economic Research (DER) assessments, said the inflationary pressures came from the higher electricity rates in Manila Electric Co.-serviced areas, increased domestic petroleum prices, and the higher meat and fish prices.
“Inflation pressures will also emanate from positive base effects. These could be offset by lower prices of fruits and vegetables and the broadly stable peso,” said Diokno.
Earlier in April, BSP officials said it is not likely that inflation will peak beyond five percent this year. According to DER head and BSP Managing Director Zeno R. Abenoja, the inflation point forecast does not show that inflation will exceed five percent but “it could go towards five percent.”
Abenoja said the situation remains uncertain. “In the next (policy) meeting come May 19, we will be evaluating again the forecast path for inflation.”
Diokno, in a Bloomberg TV interview in the US, said the BSP may consider a rates adjustment in June. This was not a surprise since the BSP has been saying since 2021 that the BSP will start to normalize its monetary policy stance in the second half of 2022 or around June.
During BSP’s last monetary policy setting exercise, on March 24, it raised the inflation forecast for 2022 to 4.3 percent from 3.7 percent (Feb. 17 policy meeting).
For 2023, the BSP also forecasts a higher inflation rate of 3.6 percent from its previous projection of 3.3 percent.
A key factor for the higher forecasts is BSP’s revised assumptions of Dubai crude prices. From a previous assumption of $83.33 per barrel average last Feb. 17, they now see $102.23 per barrel. They also raised the 2023 crude price assumption to $88.21 per barrel from the previous $75.59.
The BSP’s Monetary Board has kept the two-percent benchmark rate during its first two policy meetings last Feb. 17 and March 24 this year. The next two upcoming monetary policy meetings are scheduled on May 19 and June 23, its third and fourth policy meetings, while the fifth of eight policy meetings will be in the third quarter or August 18.