BSP signals further rate tightening as upside risks dominate inflation outlook

The Bangko Sentral ng Pilipinas (BSP) has signaled further rate hikes, as inflation continued to be above the government’s target range in the past month.

The central bank on Wednesday said it continues to monitor economic developments that affect local price dynamics, with the near-term inflation outlook continuing to be dominated by upside risks.

“The BSP is prepared to take further policy actions to bring inflation toward a target-consistent path over the medium term, consistent with its primary objective to promote price stability,” BSP said in an emailed statement.

“The BSP also continues to urge timely implementation of non-monetary government interventions to mitigate the impact of persistent supply-side pressures on commodity prices.”

Inflation accelerated to 6.9% in September, faster than the 6.3% print in August and the central bank’s 2% to 4% target range.

The central bank said near-term upside risks to inflation include the potential impact of higher global non-oil prices, further transport fare hikes, the impact of weather disturbances on food prices, and higher prices of sugar.

Fares for most forms of land transportation were increased effective Monday, October 3, as approved by the Land Transportation Franchising and Regulatory Board.

Prices of several agricultural goods have also increased by at least P20 per kilogram in Metro Manila following the impact of Typhoon Karding (international name: Noru), which hit the country last week, leaving at least P3-billion worth of damage and losses to the sector.

Meanwhile, prices of sugar have surged past P100 per kilogram in select markets in the National Capital Region, ahead of the milling season and scheduled importation in the coming months.

The BSP cited the weaker-than-expected global economic recovery as the main downside risk to the inflation outlook moving forward.

“Nevertheless, inflation risks are seen to be broadly balanced in the medium-term as global commodity prices ease going forward,” it said.

The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) last month hiked policy rates by another 50 basis points, as it expects inflation to average 5.6% this year, higher than the target range of 2% to 4%.

Prior to this, it already raised rates by 50 basis points in August, 75 basis points in an off-schedule hike in July, and 25 basis points each in June and May.  —KBK, GMA News