BSP to assess inflation outlook in next meeting: Phillipines

The Bangko Sentral ng Pilipinas (BSP) is focusing on inflation expectations in its first rate-setting meeting for this year after the softer interest rate hike by the US Federal Reserve. 'Next meeting will focus on inflationary expectations in PH (Philippines), not the Fed's 25-bps rate increase,' BSP Governor Felipe Medalla said in a Viber message to reporters. The BSP's Monetary Board was prompted to match the rate hikes delivered by the US Fed late last year to maintain a healthy 100-basis point interest rate differential to tame inflation and stabilize the peso. The central bank is widely anticipated to further hike interest rates in the first half of the year to reanchor inflation expectations as the consumer price index (CPI) remains well above the two to four percent target range. Inflation accelerated to 5.8 percent last year from 3.9 percent in 2021 after quickening to a 14-month high of 8.1 percent in December. Medalla is convinced that inflation already peaked in December and is on its way to easing to within the two to four percent target range by the end of the third quarter or early in the fourth quarter this year. The BSP chief also believes inflation will be below two percent early next year. Based on its assessment last December, inflation is set to ease to 4.5 percent this year and further to 2.8 percent next year. For January, the BSP said inflation remained elevated at a range of 7.5 to 8.3 percent as upward price pressures emanated from higher electricity rates, approved water rate rebasing, higher domestic petroleum prices, uptick in the prices of key food items, and the annual increase in sin taxes. On the other hand, the BSP said the reduction in LPG prices as well as the peso appreciation could contribute to easing price pressures in January. Due to the aggressive rate hikes delivered by the BSP and its aggressive participation in the foreign exchange market, the peso has bounced back strongly to the 53 to $1 handle after slumping by as much as 15.7 percent to hit an all-time low of 59 to $1 last October. The central bank's Monetary Board raised key policy rates by 350 basis points bringing the benchmark interest rate to a 14-year high of 5.5 percent to fight inflation and stabilize the local currency. During the height of the COVID-19 pandemic in 2020, the BSP slashed interest rates by 200 basis points to an all-time low as part of its response measures to minimize the impact of the global health crisis on the economy. It was prompted to dial back via an interest rate liftoff in May last year instead of the fourth quarter due to rising inflation brought about by the impact of Russia's invasion of Ukraine on global oil prices as well as elevated food prices due to supply shocks. The Monetary Board chaired by Medalla is set to hold the first of the eight rate-setting meetings scheduled for this year on Feb. 16. Copyright © 2022 PhilSTAR Daily, Inc Provided by SyndiGate Media Inc. (Syndigate.info).

BSP to assess inflation outlook in next meeting: Phillipines

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