BSP: Inflation in 2023 may hit historic high 6.2%

The Bangko Sentral ng Pilipinas (BSP) has upgraded its inflation outlook for the year well above the target range, on the back of higher prices brought about by the P1 fare hike, a top official said Thursday.

According to Monetary Board member Romeo Bernardo, the policy-setting body in its meeting on October 26 hiked its inflation outlook to 6.2% for the year, higher than the 5.8% projection it made during its meeting on September 21.

The Monetary Board also hiked its 2024 inflation outlook to 4.7% from its previous forecast of 3.5% set in September.

“The latest risk-adjusted forecasts are higher… due mainly to the higher-than-expected inflation outturn in September, the higher inflation for October, the approved P1 provisional jeepney fare increase, and the estimated impact of the moderate El Niño conditions on prices,” Bernardo said during the Security Bank Economic Forum in Makati City.

This could be a historic high following the 5.8% average inflation in 2022, and the highest in at least six years with 2018 as the base year. It is also higher than the central bank’s target range of 2.0% to 4.0%.

Inflation clocked in at 6.1% in September, and 4.9% in October, while the government approved a P1 provisional fare increase in jeepney fares effective Sunday, October 8, 2023.

“The balance of risks to the inflation outlook continues to lean significantly toward the upside due mainly to the potential impact of higher transport charges, electricity rates, international oil prices, and minimum wage adjustments in areas outside the NCR (National Capital Region),” Bernardo said.

Regional wage boards approved an increase in the daily minimum wages in the Ilocos Region and Western Visayas last month, and the Zamboanga Peninsula earlier this November.

During the off-cycle meeting last month, the target reverse repurchase (RRP) rate was set at 6.5%, the overnight deposit rate at 6.0%, and the overnight lending facility at 7.0%.

“Monetary policy settings will remain tighter for longer until inflationary expectations are reanchored. The BSP is prepared for further follow-through action as necessary to bring inflation back to a target-consistent path,” Bernardo said in his presentation.

The latest inflation forecasts were made public on Thursday, a week ahead of the next policy meeting of the Monetary Board scheduled on November 16, 2023.

Hongkong and Shanghai Banking Corp. Ltd. (HSBC) chief Asia economist Frederic Neumann in September said the benchmark rate is expected to be at a 16-year high until the third quarter of 2024 when rate cuts would be implemented. —NB, GMA Integrated News