MANILA, Philippines — United Kingdom-based think tank Pantheon Macroeconomics expects the Bangko Sentral ng Pilipinas (BSP) to pause its tightening cycle by keeping interest rates steady this month as inflation continued to ease in April.
Pantheon Macroeconomics chief economist for emerging Asia Miguel Chanco and senior Asia economist Moorthy Krshnan said the door is now wide open for a BSP pause in rate hikes this month.
The next rate-setting meeting of the central bank’s Monetary Board is scheduled on May 18.
The economists said the latest inflation result “adds weight to our view that the BSP likely will pause its tightening cycle this month.”
The country’s headline inflation rate slowed down for the third straight month to an eight-month low of 6.6 percent in April from 7.6 percent in March, driven by easing in food prices, as well as transport and utility costs.
Pantheon Macroeconomics sees inflation easing to 5.4 percent this year after quickening to 5.8 percent last year from 3.9 percent in 2021.
The think tank’s inflation forecast is within the Development Budget Coordination Committee’s (DBCC) revised inflation assumption of five to seven percent for this year.
Last month, the DBCC hiked its inflation outlook from the previous assumption of 2.5 to 4.5 percent as food, transport and utility costs remained high.
With the latest inflation print within the BSP’s 6.3 to 7.1 percent forecast for April, Pantheon Macroeconomics economists believe that the headline rate peaked in January.
Core inflation, which excludes volatile food and energy items, slid for the first time in over a year to 7.9 percent in April from eight percent in March.
“We’ve said for some time that the surge in core inflation will take care of itself once non-core pressures start to unwind, as this gauge, as presently constructed in the Philippines, still contains a lot of food items and those that are sensitive to oil prices,” the economists said.
The central bank said earlier it would be considering the latest inflation result and the first quarter gross domestic product (GDP) data to be released on May 11, for the next monetary policy meeting on May 18.
To rein in inflation, the BSP has raised key policy rates by 425 basis points since May last year, bringing the overnight reverse repurchase rate to a 16-year high of 6.25 percent from an all-time low of two percent.