The Bangko Sentral ng Pilipinas (BSP) announced on Tuesday, Dec. 5, that the medium-term inflation path is anticipated to “moderate,” aligning with expectations as November’s inflation reached 4.1 percent, falling within the BSP’s projected range of four percent to 4.8 percent, attributing the decline to subdued vegetable and petroleum prices as well as a robust peso against the US dollar.
The BSP foresees further deceleration in the consumer price index (CPI) in the coming months due to easing supply-side pressures and negative base effects, while emphasizing that the “balance of risks to the inflation outlook still leans significantly towards the upside.”
Upside risks include potential increases in transport charges, electricity rates, international oil prices, and higher-than-expected minimum wage adjustments outside the National Capital Region, while downside risks entail a weaker-than-anticipated global economic recovery and government measures against El Niño weather conditions.
To maintain a hawkish or tightening monetary policy bias, the BSP affirmed that it will keep settings sufficiently tight until a sustained downtrend in inflation is evident, with a commitment to monitoring inflation expectations and taking appropriate actions to bring inflation back within the target range of two percent to four percent.
The next Monetary Board policy meeting is scheduled for Dec. 14, marking the last BSP policy meeting for 2023. Since May 2022, the BSP has raised the target reverse repurchase (RRP) rate by a cumulative 450 basis points to 6.5 percent.
The latest baseline full-year CPI forecast indicates six percent for 2023, 3.7 percent for 2024, and 3.2 percent in 2025, with a risk-adjusted inflation forecast of 6.1 percent for 2023, 4.4 percent for 2024, and 3.4 percent for 2025, according to BSP projections.
Analysts, as per the November 2023 BSP Private Sector Forecasts for Inflation report, maintain a CPI average of 6.1 percent in 2023 and a 3.5 percent inflation projection for 2025, with both 2024 and 2025 estimates within the government’s target inflation range of two percent to four percent, highlighting the expectation that inflation will remain elevated but gradually move towards the target range, with significant upside risks due to supply-side shocks and second-round effects.
