The Bangko Sentral ng Pilipinas (BSP) said on Tuesday, Dec. 6, that inflation will slow down in the next months due to several factors including negative base effects.
The BSP said previously that inflation rate, which hit a 14-year high of eight percent in November, will peak either in November or December. The latest inflation outturn was higher from 7.7 percent in October and 6.9 percent in September.
The November inflation is within the BSP’s forecast range of 7.4 percent to 8.2 percent.
“Inflation is projected to decelerate in the subsequent months due to easing global oil and non-oil prices, negative base effects, and as the impact of BSP’s cumulative policy rate adjustments work its way to the economy,” the BSP said Tuesday.
The BSP has previously reported that inflation will ease to 4.3 percent for 2023 and within the two percent to four percent target by 2024 at 3.1 percent. It expects inflation path to return to within the target band by the third quarter next year and will approach the lower end of the range by the mid-2024.
The BSP said Tuesday that the risks to the inflation outlook continue to be on the upside for 2023 but remains broadly balanced for 2024.
“The key upside risks are the potential impact on international food prices of higher fertilizer prices, trade restrictions and adverse global weather conditions,” said the BSP.
The higher food prices such as sugar and meat due to bad weather and supply disruptions are also upside risks, including pending petitions for transport fare hikes.
“Meanwhile, the impact of a weaker-than-expected global economic recovery is the primary downside risk to the outlook,” said the BSP.
The central bank’s Monetary Board has so far raised the benchmark rate by a cumulative 300 basis points (bps) to three percent. The next BSP policy meeting is next Thursday, Dec. 15.
With inflation touching eight percent for the month of November, the market expects the BSP to increase the rate by 50 bps, not 25 bps, next week.
The BSP reiterated that the Monetary Board will assess the inflation outlook and macroeconomic prospects in the Dec. 15 policy meeting with a mindset that it is “prepared to take all further monetary policy actions necessary to bring inflation back to a target-consistent path over the medium-term.”
“The BSP is also reassured by the timely implementation of non-monetary government measures to mitigate the impact of persistent supply-side pressures on inflation,” it added.
BSP Governor Felipe M. Medalla said earlier that inflation will peak in November or December but it will not likely breach eight percent. The BSP’s full-year inflation forecast is 5.8 percent, above the target of two percent to four percent.
The BSP initially increased the rates gradually from a two percent flat rate. It started with two 25 bps adjustment on May 19 and June 23, followed by a surprised 75 bps off-cycle move on July 14. The fourth and fifth rate hikes were 50 bps each on Aug. 18 and Sept. 22, followed by a 75 bps increase on Nov. 17.