BSP hikes inflation expectations, says September print could reach 5%

The Bangko Sentral ng Pilipinas (BSP) on Thursday hiked its inflation forecast for this year and the next two years, with the outturn expected to be above the target range until October.

In a virtual briefing, BSP Deputy Governor Francisco Dakila, Jr. said the Monetary Board revised its inflation outlook for 2021 to 4.4% from the previous forecast of 4.1%.

Factors considered in the revision include the potential supply chain bottlenecks, the faster-than-expected print in August, as well as the continued outbreak of the African swine fever in the country’s hog industry.

Inflation is expected to remain above the 2% to 4% target range until October, and could possibly reach 5% this month due to higher suggested retail prices, petroleum prices, electricity rates, and pork prices. It is then expected to decelerate within the central bank target band by November.

“For 2021, for the remaining months of 2021, whereas before we were seeing the risks to the inflation outlook were broadly balanced, they have now tilted toward the upside,” Dakila said.

Pump prices of petroleum products were hiked in the four weeks of the month, Meralco increased power rates for September,

“These numbers are really quite manageable, and since the pressures on inflation are short-term and they emanate on the supply side, as with previous episodes of supply-side shocks, these tend to be best addressed by non-monetary actions that could ease supply constraints,” explained Dakila.

The inflation outlook for 2022 was revised upward to 3.3% from 3.1% previously, while the 2023 print is now projected at 3.2% versus the earlier projection of 3.1%.

The Monetary Board also on Thursday decided to keep key policy rates unchanged: the overnight reverse repurchase facility at 2.00%, the overnight deposit at 1.5%, and the overnight lending facility at 2.5%.

“On balance, the Monetary Board is of the view that prevailing policy settings remain appropriate given the manageable inflation environment and uncertain growth outlook,” BSP Governor Benjamin Diokno said.

“The Monetary Board reiterates that, together with appropriate fiscal and health interventions, keeping a steady hand of the BSP’s policy levers will allow the momentum of economic recovery to gain more traction by helping boost domestic demand and market confidence,” he added. — BM, GMA News