Inflation is seen accelerating further and breach the government’s two to four percent target prompting monetary authorities to gradually hike rates, according to the Bangko Sentral ng Pilipinas.
BSP Deputy Governor Francisco Dakila Jr. said the central bank’s Monetary Board further raised its inflation forecasts to five percent from 4.6 percent for 2022 and to 4.2 percent from 3.9 percent for 2023.
The policy-making body sees inflation reverting back to within the target range at 3.3 percent in 2024.
“The adjustments are due largely to the following factors: higher than expected inflation outturn in May and the latest outlook may be pointing for a high inflation number in June, also higher assumptions for oil and non-oil prices as well as the approved jeepney fare hike,” Dakila said.
The central bank is now projecting global oil prices to average $106.30 instead of $100.04 per barrel in 2022 and $95.30 instead of $89.50 for 2023.
According to Dakila, the BSP sees inflation averaging 5.6 percent in the second half of the year due to the continued rise in global commodity prices as well as more pronounced second round effects on domestic goods and services.
“The forecast path also suggests that inflation is likely to remain above the target range until the first half of 2023 before decelerating thereafter as both global oil and non-oil prices taper off,” Dakila said.
According to Dakila, the risks to inflation are tilted to the upside for 2022 and 2023 before balancing out in 2024. Upside pressures emanate from the potential impact of higher global oil and non-oil prices, the continued shortage in fish supply as well as additional transport fare hikes due to rising oil prices.
For the first five months of the year, inflation averaged 4.1 percent and breached the two to four percent target. The consumer price index quickened to 5.4 percent in May from 4.9 percent on the back of soaring global oil and commodity prices brought about by the impact of the Russia-Ukraine conflict.
To curb rising inflationary pressures, the BSP has so far raised interest rates by 50 basis points to 2.50 percent from an all-time low of two percent.