Inflation likely accelerated to a range of 3.3 to 4.1 percent in March from three percent in February amid soaring oil prices, higher electricity rates, and a weaker peso.
Bangko Sentral ng Pilipinas Governor Benjamin Diokno said the monetary authorities would continue to monitor emerging price developments and possible second-round effects to help achieve its primary mandate of price stability that is conducive to balanced and sustainable growth of the economy.
“The continued oil price hikes along with higher electricity rates in Meralco-serviced areas, higher meat prices, and the depreciation of peso are the primary sources of inflationary pressures during the month,” Diokno said.
However, he explained the upside pressures could be offset in part by lower water rates in Maynilad and Manila Water-serviced areas and the observed decrease in prices of rice, fish, and vegetables due to easing supply constraints.
After keeping interest rates at record lows last March 24, the central bank’s Monetary Board raised its interest forecasts to 4.3 instead of 3.7 percent for this year and to 3.6 instead of 3.3 percent for next year.
The BSP has set an inflation target of two to four percent for 2022 and 2023. It believes that inflation will stay within the target band if the global price of oil stays within the $95 per barrel range.
However, inflation could hit 4.4 percent if the price of oil hits $120 per barrel and 4.7 percent if it averages $140 per barrel amid Russia’s invasion of Ukraine.
During its rate-setting meeting last week, the Monetary Board also raised its Dubai crude oil price assumptions to $102.23 instead of $83.33 per barrel for this year and to $88.21 instead of $75.69 per barrel for next year.
Diokno has committed to maintain a loose and expansionary monetary policy stance in the first half of the year to allow the country to fully recover from the impact of the COVID-19 pandemic.