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BSP prepared to continue adjusting monetary policy

The Bangko Sentral ng Pilipinas (BSP) on Wednesday said it is still prepared to continue adjusting the key policy rates as necessary, as headline inflation slowed in March, but core inflation climbed to the highest in over two decades.

The central bank said the recent inflation print is consistent with its overall assessment that inflation will continue to be elevated in the near term, with the balance of risks to the inflation outlook continuing to tilt significantly to the upside for 2023 and 2024.

“The BSP will continue to adjust its monetary policy stance as necessary to prevent the further broadening of price pressures as well as the emergence of additional second-order effects,” it said in an emailed statement.

“The BSP also continues to call for the timely and effective implementation of non-monetary government measures to mitigate the impact of persistent supply-side pressures on inflation,” it added.

The Monetary Board of the BSP has already hiked key policy rates by 425 basis points since May 2022, with the latest being a 25-basis point increase that took effect on March 23 to bring the benchmark rate to 6.25%.

The Philippine Statistics Authority (PSA) earlier on Wednesday reported headline inflation at 7.6% in March, slower than the 8.6% recorded in February. Core inflation which excludes select food and energy items, however, climbed to 8.0% or the highest since March 1999’s 8.1%.

The latest outturn is consistent with the 7.4% to 8.2% forecast range of the BSP, which expects a gradual deceleration back to the target range of 2% to 4% towards the end of the year.

“The effect of supply shortages on domestic food prices remains a concern, while the potential impact of higher transport fares, increasing electricity rates, as well as above-average wage adjustments in 2023 point to the broader-based nature of price pressures,” the BSP said.

On the downside, the central bank said the impact of a weaker-than-expected global economic recovery will continue to be the main factor that could dampen inflation.—AOL, GMA Integrated News