The Philippines: Inflation may breach BSP target by 2H22

  • INFLATION could breach the central bank’s 2-4% target in 2H22 due to the surge in global oil prices, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said.
  • “Inflation is seen to settle above the target range in 2H22 due to elevated global oil and nonoil prices as well as positive base effect,” he said at an online briefing.
  • “Subsequently, inflation is projected to decelerate back to within the target in 1Q23, before steadily decelerating in the remaining quarters of 2023 as oil and nonoil prices are expected to taper off,” he added.
  • The BSP’s decision to keep rates at record lows was done considering “recovery is still at its nascent stage” and the economy is still below its full capacity, central bank officials said.
  • “In our assessment, we would be reaching 2019 gross domestic product (GDP) levels by 2H22,” BSP Department of Economic Research Managing Director Zeno Ronald R. Abenoja said.
  • “It’s not strong enough to really push inflation. It’s really the supply side factors that are really influencing the inflation that we are seeing right now and over the near term,” he added.
  • However, there are growing calls to hike transport fares and minimum daily wages. “Given the potential broadening of price pressures over the near term, the BSP stands ready to deploy timely and appropriate monetary policy measures, in line with its price and financial stability mandate,” Mr. Diokno said.
  • The central bank’s next policy meeting is on 19 May 22.

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