The Bangko Sentral ng Pilipinas (BSP) on Friday, Sept. 30, forecasts inflation may break seven percent in September at 7.4 percent due to increased electricity costs and weak peso which hit P59 this week.
The BSP’s forecast range is 6.6 percent to 7.4 percent, higher than actual August inflation of 6.3 percent.
BSP Governor Felipe M. Medalla has said that they expect peak inflation to come either in September or October this year.
In a statement, the BSP said inflation for September will be higher compared to August due to the increase in electricity rates and prices of key food commodities, on top of the still depreciating peso.
However, the BSP said “this could be offset in part by the decline in local fuel prices and lower meat prices.”
“The BSP will continue to monitor very closely emerging price developments to enable timely intervention to prevent the further broadening of price pressures, in accordance with the BSP’s price stability mandate,” said the BSP.
On Sept. 22, the BSP’s policy-making body, the Monetary Board, raised the key rate by another 50 basis points (bps) to 4.25 percent to ease pressures off the peso as well as ensure inflation will fall back to within target by the second half of next year.
The BSP has lifted the policy rate five times in a row since May 19, including an off-cycle 75 bps adjustment last July 14. In total, the reverse repurchase (RRP) rate has been increased by 225 bps to fight off price pressures and its secondary effects.
For this year, the average inflation forecast is higher at 5.6 percent from its previous estimate of 5.4 percent, while for 2023, the forecast is now 4.1 percent from the previous four percent.
However for 2024, inflation is expected to average at three percent, lower from its earlier projection of 3.2 percent.
Upside pressures to inflation still come from the potential impact of higher global non-oil prices, pending petitions for further transport fare hikes, the impact of weather disturbances on prices of food items, as well as the sharp increase in the price of sugar, he added. As for downside pressures, it is mainly from the weaker-than-expected global economic recovery.
