BSP chief sees local prices easing in 2023

BANGKO Sentral ng Pilipinas (BSP) Governor Felipe Medalla hinted at lowering their inflation forecast for next year, as favorable global developments may bode well for local prices in 2023.

Keynoting the Financial Executives Institute of the Philippines (FINEX) Special Membership Meeting on Tuesday, Medalla said they are looking at revising their current forecast of 4.3 percent downward nearer the ceiling of their 2 to 4 percent target range.

Medalla said a key factor to this decision are the lower global oil prices in recent months, with trends showing that this will continue next year. He also said that both Russia and Ukraine—whose war was the cause of rising prices in key commodities—have found a way to ease global supply tensions in a bid to prove that one is the “responsible warrior” in the war.

In their June monetary policy meeting, the BSP announced its latest inflation forecasts: an average of 5 percent for this year and 4.3 percent for next year.

The governor also said that the latest rate hike—which is a 75 basis point off-cycle increase in interest rates—as well as future rate hikes are aimed at ensuring that the momentum of inflation is towards a downward trajectory.

He also reiterated the BSP’s commitment towards managing inflation and inflation expectations.

“The chances of bringing down inflation without bringing down growth is next to zero…We are very firm on our pillars, the first of which is price stability,” Medalla said.

Just last week, the BSP said inflation could have settled within the range of 5.6 to 6.4 percent as growth in prices was driven by the continued increase in food prices, further transport fare hikes, and the peso depreciation.

In June, inflation hit 6.1 percent.

Medalla earlier said they will continue to vigilantly watch price pressures in the country to aid in their decision towards monetary policy.

“The BSP will continue to closely monitor emerging price developments to enable timely intervention to arrest emergence of further second-round effects, consistent with BSP’s mandate of price and financial stability,” Medalla said.

Medalla also earlier assured markets of another rate hike in their scheduled meeting in August.

The BSP chief said the hike will be to the tune of 25 basis points or 50 basis points, depending on the latest data on the economy during that time.

Image credits: Bernard Testa