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Add'l BSP rate hike possible after core inflation uptick in March

By Joann Villanueva

April 5, 2023, 3:03 pm

MANILA – The acceleration of core inflation in March 2023 will likely result in another hike in the Bangko Sentral ng Pilipinas’ (BSP) key rates to help bring down headline inflation within the government’s 2 percent to 4 percent target band, according to the Bank of the Philippine Islands (BPI).
 
“(The) rise in core inflation may justify another rate hike in the next Monetary Board meeting,” the BPI said in a commentary Wednesday. 
 
The Monetary Board’s next meeting is slated for May 18.
 
“Additional monetary tightening will also hasten the process of bringing down inflation back to the target of the BSP,” it said.
 
The BSP’s key rates have been hiked by a total of 425 basis points since May 2022 to help address the impact of the pandemic on the economy, as well as to dampen the elevated inflation rate.
 
The BPI said a positive change in the domestic inflation environment may transpire in the second half of this year, “barring any global commodity price shocks and provided that non-monetary measures prove effective in normalizing (the) food supply situation in the country.”
 
“It is only by then that we think the BSP could reasonably consider re-assessing its tightening campaign,” it said.
 
The commentary noted that “further tightening may help the central bank rebuild its external buffers after having lost so much in 2022.”
 
“Rate cuts may be justified if we are able to achieve a comfortable buffer, and if month-on-month changes in core and headline CPI (consumer price index) fall to 0.2 percent or lower for at least three straight months,” it added.
 
The Philippine Statistics Authority (PSA) reported another year-on-year slowdown in headline inflation to 7.6 percent last March from 8.6 percent in the previous month.
 
However, core inflation, which excludes volatile oil and food items, registered a faster rate of 8 percent last month from 7.8 percent in February. (PNA)
 

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