Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr. is fairly confident that – barring any unexpected global and local supply shocks – the inflation rate will stay within the government target of two percent to four percent in 2024.
“We’re not out of the woods yet but we’re within striking distance of our target range which is between 4% and 2%,” said Remolona during a Philippine Economic Briefing (PEB) on Nov 15. (Nov. 16 Philippine time) in San Francisco, California. He is with other economic managers for the PEB, on the sidelines of the Asia-Pacific Economic Cooperation 2023 Summit in the US.
Remolona said next year’s inflation path is seen to breach the target in some months especially in the second quarter 2024, but will largely stay within the expected range.
“For 2024, I think (that) for most of the year (it will be) between 4% and 2%. Around April to July it will approach the ceiling and even exceed the ceiling but for most of the year, we should be between 2% and 4%,” said the BSP chief.
Remolona said the country’s inflation rates “have been very high for the past couple of years as it has been for the rest of the world” despite tightening the policy rate by a cumulative 450 basis points (bps) from May 2022 until October 2023.
The BSP’s Monetary Board will decide Thursday, Nov. 16, the next policy rate while Remolona, who is the chairman of the policy-making body, is in the US.
The last time the BSP raised the key rate was Oct. 26 in an off-cycle decision. It was an expected rate hike of 25 bps.
As for the Nov. 16 policy meeting, the market expects the BSP will opt for a hold stance with a lower-than-expected October inflation of 4.7 percent and a higher-than-expected economic growth of 5.9 percent for the third quarter.
Based on the minutes of the Oct. 26 Monetary Board meeting, the BSP’s latest staff risk-adjusted inflation forecast for 2024 is 4.7 percent, which is higher than the baseline forecast of 3.5 percent during the Sept. 21 Monetary Board meeting.
Economists polled by the BSP in October also raised its inflation forecast for 2023 to 6.1 percent versus its earlier estimate of 5.9 percent in September.
The BSP said inflation expectations have increased. Based on the survey, the inflation expectations for 2024 was also raised to 4.1 percent from 3.7 percent previously.
Meanwhile, the mean inflation forecast for 2025 remained at 3.5 percent. “Analysts expect inflation to remain elevated due to the higher-than-expected September inflation print and recent supply-side pressures domestically and overseas,” said the BSP.
The BSP as of Sept. 21 has a 2024 inflation forecast of 3.5 percent and 3.4 percent for 2025. It said the balance of risks to the inflation outlook remains skewed toward the upside in the next two years.