The Bangko Sentral ng Pilipinas (BSP) expects inflation to settle within its two to four percent target range by the fourth quarter of the year despite the uptick to 5.3 percent in August from 4.7 percent in July.
BSP Deputy Governor Francisco Dakila Jr. told participants of the Philippine Economic Briefing in Dubai that there was an acceleration in inflation in August due to weather-related disturbances that pushed food prices higher after easing for six straight months to 4.7 percent in July from a 14-year high of 8.7 percent in January.
'Right now, despite August outturn, we continue to see inflation on a target-consistent path,' Dakila said.
He said inflation is projected to return to target by the fourth quarter of the year but risks are skewed toward the upside.
Dakila said actions by the BSP and the government have safeguarded inflation expectations.
He said forecasts made by economists from Aug. 5 to 9 show inflation would settle at 5.5 percent this year, 3.5 percent next year and 3.4 percent in 2025.
These figures are well within the revised forecasts of the BSP as of Aug. 17 at 5.6 percent from the original target of 5.4 percent for this year, 3.3 percent from 2.9 percent for 2024 and 3.4 percent from 3.2 percent for 2025.
'Barring the occurrence of unforeseen shocks, we expect that we will be reverting back to target by the fourth quarter of this year,' he said.
By the first quarter of 2024, he said headline inflation may be below the mid-point of the two to four percent target set by the central bank.
However, he said risks to the inflation outlook have remained tilted toward the upside both for this year and for next year.
Dakila said the BSP would closely watch the decision of the US Federal Reserve on Sept. 20 and would use the outcome of the meeting as additional information for their rate-setting meeting on Sept. 21.
'Focus of the Monetary Board will be on domestic situations. Impact of external factors will be less compared to last year,' Dakila said.
Due to the inflation downtrend and the slower-than-expected gross domestic product (GDP) growth in the second quarter, the BSP has maintained a hawkish pause as it kept interest rates unchanged in three rate-setting meetings in May, June and August.
Dakila emphasized that the BSP has made it clear that its stands ready to respond as necessary to any risks that threaten the achievement of the inflation target.
The BSP emerged as the most aggressive central bank in the region as it raised interest rates by 425 basis points between May last year and March this year to tame inflation and stabilize the peso that slumped to an all-time low of 59 to $1 last October.
'The BSP's previous monetary tightening is still working its way to the economy and the Board has seen it prudent to keep a steady hand on our monetary policy levers,' Dakila said.
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