BSP: Within-target inflation by end-23 still possible despite upticks

By Joann Villanueva

October 5, 2023, 5:04 pm

<p><em>(PNA file photo)</em></p>

(PNA file photo)

MANILA – Monetary authorities remain optimistic of within-target inflation rate by the end of 2023 despite the second consecutive month of uptick in the rate of price increases last September due to higher food and oil prices.

The Philippine Statistics Authority (PSA) on Thursday reported that domestic headline inflation rate registered another uptick in the ninth month this year to 6.1 percent from a month-ago’s 5.3 percent, driven by the faster annual increase in the heavily-weighted food and non-alcoholic beverages index and the transport index due to higher oil prices.

Despite the faster inflation rate, the Bangko Sentral ng Pilipinas (BSP) said the level last September is at the upper end of its 5.3-6.1 percent forecast range for that month and is seen to remain elevated in the succeeding months “due to continued impact of supply shocks on food prices and the rise in global oil prices.”

“Nonetheless, inflation is still projected to decelerate back to within the inflation target by end-2023 in the absence of further supply shocks,” it said in a statement Thursday.

Average inflation to date stood at 6.6 percent, way above the government’s 2-4 percent target band until 2025.

The BSP said risks to the inflation outlook still lean “significantly to the upside for 2023 to 2025.”

“The potential impact of new petitions for transport fare adjustments, higher domestic prices of key food items facing persistent supply constraints, higher-than-expected minimum wage adjustment in areas outside NCR, impact of El Niño weather conditions on food prices and utility rates, and higher electricity rates are the major upside risks to the inflation outlook,” the BSP said.

Last Tuesday, the Land Transportation Franchising and Regulatory Board (LTFRB) approved the PHP1 provisional fare hike for both the traditional and modern public utility jeepneys (PUJs) nationwide effective Oct. 8, 2023.

This brought the minimum fare in traditional jeepneys to PHP13 and to PHP15 for modern PUJs.

The BSP said the upside risks to the inflation outlook are seen to be countered by the effects of the weaker-than-expected global recovery.

“The BSP stands ready to resume monetary policy tightening as necessary to prevent the renewed broadening of price pressures as well as the emergence of additional second order effects in view of the persistent upside risks to the inflation outlook,” it said.

During the last rate-setting meeting of the central bank’s policy-making Monetary Board (MB) last Sept. 21, the Board kept the BSP’s key rates steady for the fourth consecutive meeting after noting that inflation is seen to slow to within-target levels in the last quarter of this year.

BSP Governor Eli Remolona Jr., in a press conference after the MB meeting, said a rate hike during the Board’s meeting on Nov. 16 is possible given the inflation rate increases.

“The BSP also continues to support the timely and effective implementation of non-monetary government measures to mitigate the impact of persistent supply-side pressures on inflation,” Remolona said. (PNA)