Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla said the country’s inflation is still high but is more confident the consumer price index (CPI) is going where they want it to be, which is within the government’s two percent to four percent target by next year. “Nevertheless, the risk to inflation, especially because of possible global shocks and tensions, maybe even the El Niño, continue to lean toward the upside for 2023 and 2024. Therefore, going forward, the central bank remains vigilant against inflation risk over the policy horizon,” he said a day before the April inflation was announced. This is the third month in a row that inflation has decelerated since hitting a high of 8.7 percent in January. It dipped to 8.6 percent in February and more sharply in March which recorded a 7.6 percent CPI. Medalla has already signaled to the market that if month-on-month inflation will still be in the negative for a third month – or in April – then this could convince the Monetary Board to pause its interest rate increases on May 18, which is the next policy meeting. The BSP has raised its key rate nine times since May 19, 2022, by a cumulative 425 basis points (bps). On Friday, May 5, the Philippine Statistics Office reported a lower CPI of 6.6 percent for the month April versus 7.6 percent in March. The BSP said the April CPI and the first quarter gross domestic product (GDP) data to be released on May 11 will be two key indicators they will consider on May 18. “The Monetary Board will consider the latest inflation outturn along with the upcoming GDP release for Q1 2023 in its meeting on monetary policy on 18 May 2023 as it remains committed to adjusting the monetary policy stance as necessary to prevent the further broadening of price pressures as well as the emergence of additional second order effects,” said the BSP, adding that it “continues to support the timely and effective implementation of non-monetary government measures to mitigate the impact of persistent supply-side pressures on inflation.” Medalla has previously said that the BSP is assuming first quarter GDP will expand by 7.1 percent. The government expects GDP growth of six percent to seven percent for the full year. “With regards to inflation, the latest outturns are still high, but we are quite confident that inflation – although it remains elevated – will revert towards the mid-point of our target by next year,” he said in a May 4 Asian Development Bank (ADB) event in Incheon, South Korea. In a statement on Friday, the BSP said the 6.6 percent April CPI is “consistent with the overall assessment that inflation will remain elevated over the near term before gradually decelerating back to target range towards end-2023.” “The balance of risks to the inflation outlook for 2023 and 2024 also remains tilted heavily towards the upside. Despite the recent slowdown in food inflation, the potential effect of ongoing supply shortages continues to pose an upside risk to the outlook. Other upside risks emanate from the impact of higher transport fares, increasing electricity rates, as well as above-average wage adjustments in 2023. On the downside, the impact of a weaker-than-expected global economic recovery continues to be the primary factor that could dampen inflation,” said the BSP. The 6.6 percent April inflation is within BSP’s forecast range of 6.3 percent to 7.1 percent, citing lower electricity rates, the decline in prices of fish and vegetables, and rollback in LPG prices for the easing of price pressures during the month. At the moment, the BSP forecasts inflation of six percent for 2023 and 2.9 percent for 2024. Considering the decelerating inflation since February, the BSP is expected to announce a below six percent inflation forecast for this year. Meanwhile for 2024, Medalla remains confident that inflation is going to be very close to the midpoint target and may even be below two percent in some months next year. He also said that by October or November this year, CPI will be below four percent.