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Friday, March 29, 2024

Inflation likely to breach BSP target this year

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Inflation is expected to breach the upper end of the government’s target range of 2 percent to 4 percent this year and in 2023, the highlights of the latest policy meeting of the Bangko Sentral ng Pilipinas show.

The report released to the media Friday showed that inflation expectations rose further over the policy horizon.

Private sector economists surveyed in September reported a higher mean inflation forecast for 2022 at 5.5 percent, compared to 5.4 percent in the August survey.

The mean inflation forecasts for 2023 and 2024 also increased to 4.3 percent from 4.2 percent, and to 3.8 percent from 3.7 percent, respectively.

Results of the BSP’s third-quarter expectations survey on businesses and consumers indicated that both sectors were anticipating inflation to breach the upper end of the target range for 2022 and 2023.

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“The latest baseline forecasts indicate that inflation could settle above the government’s target range of 3.0 percent ± 1.0 ppt at 5.6 percent for 2022 and at 4.1 percent for 2023,” the BSP said.

“Inflation is projected to decelerate back to the midpoint of the target range at 3.0 percent in 2024. The upward revision in the forecasts for 2022 and 2023 is driven by the higher inflation now cast for September, the continued depreciation of the peso and the recently-approved nationwide transport fare hikes,” it said.

Meanwhile, the impact of slower domestic and global growth outlook, lower assumptions for global crude oil and non-oil prices and the BSP’s 50-basis-point policy rate increase in August led to the downward adjustment in the 2024 inflation forecast.

The Monetary Board, the policy-making body of Bangko Sentral ng Pilipinas, raised on Sept. 22 the benchmark policy interest rate by 50 basis points to 4.25 percent to rein in the elevated inflation and support the depreciating peso.

The move came following an earlier 75-basis point hike by the US Federal Reserve to tame the persistently high inflation in the world’s biggest economy.

This brought the BSP’s total rate increase this year to 2.25 percent.

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