BSP more confident inflation is target consistent

Inflation coming down, but risks to CPI such as global shocks, even El Niño, still tilted to the upside for 2023 and 2024, says BSP chief Medalla.

Bangko Sentral ng Pilipinas Governor Felipe M. Medalla said the country’s inflation is still high but is more confident the consumer price index is going where they want it to be, which is within the government’s two percent to four percent target by next year. Medalla has already signaled to the market that if month-on-month inflation will still be in the negative for a third month – or in April – then this could convince the Monetary Board to pause its interest rate increases on May 18, which is the next policy meeting. The BSP has raised its key rate nine times since May 19, 2022, by a cumulative 425 basis points .

Medalla has previously said that the BSP is assuming first quarter GDP will expand by 7.1 percent. The government expects GDP growth of six percent to seven percent for the full year. “The balance of risks to the inflation outlook for 2023 and 2024 also remains tilted heavily towards the upside. Despite the recent slowdown in food inflation, the potential effect of ongoing supply shortages continues to pose an upside risk to the outlook. Other upside risks emanate from the impact of higher transport fares, increasing electricity rates, as well as above-average wage adjustments in 2023.

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