The Bangko Sentral ng Pilipinas (BSP) on Tuesday, Sept. 6, noted the widening inflation upside price pressures in the near term which is still consistent with its overall inflation outlook for 2022.

The BSP also remains confident of its future inflation reading especially since the August consumer price index (CPI) of 6.3 percent was within its forecast band of 5.9 percent to 6.7 percent.

“The August 2022 inflation outturn of 6.3 percent (is) consistent with the BSP’s assessment of elevated price pressures over the near term due to broadening price pressures. The uptick in inflation remains supply-driven, but signs of broadening price pressures are also being noted,” said the BSP.

Upside risks continue to dominate the inflation outlook in the near term due to the potential impact of higher global non-oil prices, the continued shortage in domestic fish supply, the sharp increase in the price of sugar, as well as pending petitions for transport fare increases, said the BSP.

Downside risks are still the weaker-than-expected global economic recovery as well as the resurgence of local Covid-19 cases in the country.

The BSP expects inflation to remain above the two percent to four percent target this year and will only fall below four percent in the second half of 2023. The Monetary Board’s 175 basis points (bps) cumulative rate increases which brought the interest rate from two percent to 3.75 percent, ensures inflation will go back to within the target.

“The BSP’s recent policy actions are intended to bring inflation and inflation expectations back to the target to ensure the balanced and sustainable growth of the economy in the medium term,” said the BSP.

BSP Governor Felipe M. Medalla has already hinted that the last 50 bps rate increase last Aug. 18 may not be the last one for 2022. The next policy rate meeting is on Sept. 22.

The BSP reiterated that it is ready for further policy actions “to bring inflation toward a target-consistent path over the medium term, consistent with its primary objective to promote price stability (but it continues) to urge timely implementation of non-monetary government interventions to mitigate the impact of persistent supply-side pressures on commodity prices.”

Medalla has said that inflation will likely peak in September or October this year. Headline inflation year-to-date is at 4.9 percent average as of end-August.

The BSP currently forecasts average inflation of 5.4 percent for this year. For 2023 and 2024, the BSP forecasts four percent and 3.2 percent inflation.