INFLATION will likely remain within the 2.0- to 4.0-percent target range over the next two years amid continued upside risks, analysts polled by the Bangko Sentral ng Pilipinas (BSP) said.
“Results of the BSP’s survey of external forecasters for June 2024 showed inflation expectations staying near the upper end of the target range for 2024,” a central bank report on last month’s Monetary Board meeting stated.
The highlights of the June 27 meeting, which were released on Thursday, added that expectations “for 2025-2026 have eased further toward the midpoint of the target range.”
Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. PHOTO FROM BSP
The survey respondents forecast a 3.7-percent result for this year, unchanged from May, while the projections for 2025 and 2026 edged down to 3.4 percent and 3.3 percent, respectively, from 3.5 percent and 3.4 percent previously.
“Analysts expect within-target inflation over the policy horizon, although upside risks continue to dominate their outlook owing to supply side pressures and potential second-round effects,” the central bank report states.
Inflation, which was expected to breach the target range as early as the second quarter of this year due to the impact of the El Niño weather pattern on food prices, snapped a four-month rise in June by slowing to 3.7 percent.
The Monetary Board, which decided to keep key interest rates unchanged for a sixth straight policy meeting, said the balance of risks had shifted to the downside following the government’s move to slash tariffs on imported rice.
It revised its risk-adjusted forecast for 2024 to 3.1 percent from 3.8 percent, while that for 2025 was also reduced to 3.1 percent from 3.7 percent. The baseline forecasts for 2024 and 2025 were also trimmed to 3.3 percent and 3.1 percent, respectively, from 3.5 percent and 3.3 percent.
“If sustained, an improvement in inflation outlook would allow the Monetary Board to consider a less restrictive monetary policy stance,” the BSP report states.
“However, uncertainty in the external environment requires continued caution against potential spillovers, including those in the financial markets,” it adds.
The Monetary Board’s June 27 meeting was held before inflation forecasts for the month were released. As early as May, however, with inflation still within target, BSP Governor Eli Remolona Jr. said that rate cuts could start as early as August.
He has doubled down on easing next month — the policymaking Monetary Board will next meet on August 15 — and most recently said that waiting too long to cut could lead to an unnecessary loss of economic output.
The BSP’s benchmark rate remains at an over 17-year high of 6.5 percent, the result of 450 basis points of increases beginning May 2022 after inflation started surging in the wake of Russia’s invasion of Ukraine.
Be the first to comment