Analysts anticipate a decrease in the headline consumer price index (CPI) to below four percent in December, following November’s 4.1 percent inflation rate, down from October’s 4.9 percent, raising confidence in the central bank maintaining the key rate at 6.5 percent during the upcoming policy decision meeting.
Both HSBC and Bank of the Philippine Islands (BPI) economists predict a slowdown in December’s inflation, likely prompting the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) to keep rates unchanged. HSBC notes the weaker November inflation, expecting it to fall within the BSP’s 2-4% target range in December, barring any supply-side shocks.
While HSBC foresees the BSP adopting a hawkish stance for some time, BPI economists consider the possibility of inflation reaching 3% in the first quarter of 2024, but caution against premature speculation about rate cuts, emphasizing the need to monitor the Federal Reserve’s actions.
The BSP acknowledges easing supply-side pressures but highlights upside risks, including higher transport fares, electricity and oil prices, and potential wage adjustments. The next Monetary Board policy rate meeting on Dec. 14 will be crucial, with the BSP having raised the reverse repurchase rate by 450 basis points since May 2022. The BSP’s current full-year CPI forecast is six percent for 2023, 3.7 percent for 2024, and 3.2 percent in 2025.
