The central bank expects inflation rate will peak in December, possibly around 8.5 percent or lower compared to November’s actual eight percent, before tapering off in January.
“I’m almost sure the peak is in December, not January (2023), because the base effects are working in favor of January,” Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla told reporters on Tuesday, Dec. 20.
Medalla said he will give it a “50 percent chance” that the December inflation could hit a high of 8.5 percent or lower. “You can never rule it out,” he said, using a standard error forecast of plus or minus 0.4 percent.
For example, if the starting point is November’s eight percent, if the December rate comes out at 8.3 percent, that is a correct forecast. A plus or minus 0.4 percent is range of 7.6 percent to 8.4 percent.
The BSP had thought previously that inflation will peak in October but typhoons derailed this inflation path.
Meantime, Medalla said the exchange rate -- with the peso seem stabilizing at the P55-56 level and with the US dollar no longer as strong -- is no longer a worry factor in as far as inflation is concerned.
Inflation, which hit eight percent in November, currently has a year-to-date average of 5.6 percent. The BSP forecasts an average inflation of 5.8 percent for 2022, 4.5 percent in 2023 and 2.8 percent in 2024.
The BSP has said that inflation will slow down in the next months after peaking in December due to several factors including negative base effects.
The easing global oil and non-oil prices, negative base effects, and the impact of BSP’s 350 basis points (bps) cumulative policy rate adjustments will ensure inflation path will decelerate in 2023 until 2024.
It expects inflation path to return to within the target band of two percent to four percent by the third quarter next year and will approach the lower end of the range by the mid-2024.
The BSP said 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. 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.