BSP emphasized the battle against inflation is ongoing and far from being resolved
Bangko Sentral ng Pilipinas Governor Eli Remolona has emphasized that it’s premature to declare victory in the battle against inflation. Despite recent data showing inflation settling within the target range of two to four percent for the third consecutive month, Remolona cautioned that inflationary risks persist, clouding the economic outlook.
Inflation accelerated to a two-month high of 3.4 percent in February from 2.8 percent in January. However, Remolona highlighted that the BSP’s risk-adjusted inflation forecast remains near the upper end of the target range.
To combat inflation and stabilize the peso, the BSP has raised the key interest rate by 450 basis points to 6.50 percent, the highest level in nearly 17 years. While the Monetary Board has maintained rates since its last off-cycle increase in October 2023, Remolona suggested that further tightening is unlikely, but not ruled out.
Remolona also pointed out that elevated rice prices pose upside risks to inflation expectations, as they have a significant impact on consumer sentiment. However, the BSP has been managing expectations effectively so far.
Senior economist Nicholas Mapa noted that monetary policy tightening and prolonged high interest rates may not effectively address supply-driven inflation. He suggested that additional rate hikes could further constrain overall economic growth.
Rice inflation reached 23.7 percent in February, the highest since February 2009, which could exacerbate inflationary pressures. Economist Euben Paracuelles cautioned that if upside risks materialize, the BSP might delay policy easing, especially with a gradually improving growth outlook.
Paracuelles also warned against higher-than-minimum wage increases, as they could amplify second-round effects on inflation. Lawmakers are deliberating on a potential P100 increase in the daily minimum wage, which, combined with supply-side constraints, could further strain inflationary pressures.
Business News: BSP emphasized the battle against inflation is ongoing and far from being resolved
