Inflation further slows down in April, says BSP

MANILA, Philippines — Inflation likely cooled further for the third straight month to settle within the range of 6.3 to 7.1 percent in April from a six-month low of 7.6 percent in March, according to the Bangko Sentral ng Pilipinas.

BSP Governor Felipe Medalla said lower electricity rates, the decline in prices of fish and vegetables as well as the rollback in LPG prices contributed to easing price pressures this month.

Meanwhile, Medalla said the upward price pressures are expected to emanate from higher domestic petroleum prices, increased rice and meat prices, and peso depreciation.

Inflation has been easing to 8.6 percent in February and further to 7.6 percent in March after  hitting its peak at a 14-year high of 8.7 percent in January.

The consumer price index averaged 8.3 percent in the first quarter, more than double the high end of the central bank’s two to four percent target range.

Since it started its interest rate liftoff in May last year to fight inflation and stabilize the peso, the BSP’s Monetary Board has so far raised key policy rates by 425 basis points, making it the most aggressive central bank in the region.

This brought the benchmark interest rate to a 16-year high of 6.25 percent from an all-time low of two percent. This is the lowest since the 7.50 percent recorded in May 2007.

“Going forward, the BSP remains prepared to respond appropriately to continuing inflation risks in line with its data-dependent approach to monetary policy formulation,” Medalla said.

Inflation has stayed above the central bank’s two to four percent target range for the past 12 months or since April last year.

The BSP chief is confident that inflation will cool to within the target range toward the end of the year or either in November or December before further easing to the mid-point of the target range next year.

Based on its last assessment on March 23, the Monetary Board slashed its inflation forecasts to six percent from 6.1 percent for 2023 and to 2.9 percent from 3.1 percent for 2024.

With the continued inflation downtrend, the BSP chief earlier said it could pause its monetary tightening as early as May.

Last Monday, the Cabinet-level Development Budget Coordination Committee raised its inflation forecast for this year to a range of five to seven percent from the previous 2.5 to 4.5 percent, given the persistent high prices of food, energy and transport.

Nevertheless, the government, through the Inter-Agency Committee on Inflation and Market Outlook, is committed to pursuing an all-of-government approach to continuously implement immediate and medium-term strategies to alleviate inflation, ensure food and energy security, and return to the target range of two to four percent between 2024 and 2028.

Due to soaring global oil prices brought about by Russia’s invasion of Ukraine as well as higher food prices amid supply shocks, inflation quickened to 5.8 percent last year from 3.9 percent in 2021.

Security Bank chief economist Robert Dan Roces said the April inflation is likely to settle at 6.8 percent with a range of 6.5 to 7.1 percent from 7.6 percent in March.

Roces said the month-on-month price movement may likely be flat or slightly negative due to lower electricity rates, LPG price rollbacks and declining prices of fish and vegetables.

According to the economist, upward pressures include the depreciation of the peso, higher petroleum prices as well as upward price movements in rice and meat prices.

“As to implications to monetary policy, the BSP will consider the risks from global crude’s price volatility near-term and El Nino’s risks in the second half of the year,” he said.