INFLATION will likely stay steady for the rest of the year, Metrobank Research said, supported by lower rice tariffs and increased supplies of the staple.
“Rice prices are expected to continue to weigh on headline inflation, driven by lower tariffs and increased local supply following the harvest season,” it said in forecasting that consumer price growth would settle at 2.0 percent for the remaining three months of 2024.
“This development is likely to offset potential oil price hikes associated with geopolitical tensions in the Middle East.”
Inflation was a slower-than-expected 1.9 percent in September. It brought the year-to-date average to 3.4 percent, within the Bangko Sentral ng Pilipinas’ 2.0- to 4.0-percent target.
Metrobank Research maintained its full-year forecast at 3.2 percent and said the rate could slow to 2.9 percent in 2025 and then pick up to 3.0 percent the following year.
Slowing inflation has allowed the BSP to embark on an easing cycle and on Wednesday, central bank Governor Eli Remolona Jr. said that price pressures remained manageable.
The risk-adjusted forecast for this year was trimmed to 3.1 percent from 3.3 percent, but those for 2025 and 2026 were raised to 3.3 percent and 3.7 percent, respectively, from 2.9 percent and 3.3 percent.
The upside risks were said to emanate from potential adjustments in electricity rates and higher minimum wages in areas outside Metro Manila.
The BSP’s policymaking Monetary Board cut key interest rates by 25 basis points (bps) in August and last Wednesday ordered an additional 25-bp reduction, which brought the policy rate to 6.0 percent.
Remolona indicated that another 25-bp cut could follow in December.
Metrobank Research echoed this and said “the BSP should have scope to continue its monetary easing.”
“The recent policy easing, along with the 250-bp reduction in the reserve requirement ratio, should provide a more accommodative policy environment to help boost private consumption and investments which have been tempered by high interest rates and somewhat elevated inflation,” it added.
Metrobank Research maintained its forecast 75 bps worth of cuts for 2024, which would bring the policy rate to 5.75 percent by year-end.
Expected cuts next year total 100 bps for a policy rate of 4.75 percent.
Remolona has said that monetary authorities want to take “baby steps in terms of adjusting the policy rate,” meaning 25 bps cuts at a time.
Be the first to comment