Inflation hovers near 3-year high
BSP sees up to 5% CPI growth in April
Inflation in April likely accelerated further from a six-month high of four percent in March, nearing its highest level in over three years, due to mounting price pressures – from oil and electricity to meat and fish, the Bangko Sentral ng Pilipinas (BSP) said.
BSP Governor Benjamin Diokno said higher electricity rates in areas serviced by Manila Electric Co. (Meralco), soaring domestic petroleum prices, as well as higher meat and fish prices are the primary sources of inflationary pressures this month.
He said inflation – the growth in the consumer price index or CPI – likely rose further to a range of 4.2 to five percent in April. The last time inflation hit the five percent level was in December 2018, at 5.1 percent.
However, Diokno said inflation pressures can also emanate from positive base effects.
“These could be offset by lower prices of fruits and vegetables and the broadly stable peso,” he said.
Looking ahead, the BSP chief said monetary authorities would continue to monitor emerging price developments and possible second-round effects to help achieve the BSP’s primary mandate of price stability, which is conducive to a balanced and sustainable economic growth.
Inflation averaged 3.4 percent in the first quarter after hitting a six-month high of four percent in March from three percent in February amid soaring global oil prices due to Russia’s invasion of Ukraine.
Diokno earlier said inflation is likely to remain elevated and breach the BSP’s two to four percent target starting in the second half before easing back to within the target range by the first quarter of next year.
Due to rising global oil prices caused by the Russia-Ukraine war, the BSP’s Monetary Board now expects inflation to average 4.3 percent instead of 3.7 percent this year and 3.6 percent instead of 3.3 percent next year, based on its assessment on March 24.
However, the Philippines could join the global rate hike cycle led by the US Federal Reserve as early as June as the country continues to rebound from the pandemic-induced recession.
Diokno said early this week that the BSP may consider raising its benchmark interest rate in June after keeping it at record lows since November 2020.
“We have another meeting in June. And maybe that’s the time when we will consider the increase in policy rate,” he said.
The BSP chief said the Monetary Board is likely to keep interest rates on hold anew during its next rate-setting meeting on May 19. The following and fourth meeting of the policy-setting body this year is on June 23.
Diokno also said that an increase in the policy rate to a range of 2.50 percent to 2.75 percent within the year is possible.
Last March 16, the US Fed started lifting rates by a quarter percentage-point to 0.5 percent to address the fastest inflation in four decades. This was the first increase since 2018