Rizal Commercial Banking Corporation chief economist Michael Ricafort (PNA file photo)
MANILA – Headline inflation likely stayed at 4.1 percent in December as global oil prices continue to decline, an economist said Tuesday.
"My inflation estimate for December 2023: 4.1 percent year-on-year largely due to the net decline in global crude oil prices," Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said.
Headline inflation further eased to 4.1 percent in November, just slightly higher than the government's 2 to 4 percent target range.
Ricafort said the stronger peso exchange rate against the US dollar could help reduce importation costs and overall inflation.
"Relatively better weather conditions in most parts of the country during the month would still help inflation [to be] relatively slower," he said.
Inflation can settle within the government's target provided that there will be no escalation of geopolitical risks particularly on the Israel-Hamas war and the potential effects on world oil prices, he added.
"Provided [also that there will be] no large storm or El Niño drought damage that tends to increase food prices, for the rest of 2023, headline inflation could be around 4 percent for December 2023 or possible to already within the 2 to 4 percent inflation target," he said.
Ricafort said the easing inflation in recent months would allow the Bangko Sentral ng Pilipinas to maintain policy rates.
"Thus, easing inflation trend in recent months, still relatively stronger peso exchange rate versus the US dollar in about 4.5 months, and 5-month lows for global crude oil prices would support a pause in local policy rates, or at least reduce the urgency for any additional local policy rate hikes, especially if the Israel-Hamas war does not spread in the Middle East," Ricafort said.
The BSP has so far kept policy rates unchanged for two consecutive meetings.
At present, the BSP’s Target Reverse Repurchase Rate is at 6.50 percent while the interest rates on the overnight deposit and lending facilities are at 6.0 percent and 7.0 percent, respectively. (PNA)
