A bank research team expects the Bangko Sentral ng Pilipinas to start its monetary easing cycle in the fourth quarter, as inflation is seen to continue its upward momentum in the next two months.
The research and market strategy team of Metropolitan Bank and Trust Co., named as the country’s top forecaster for inflation and for exchange rate at the FocusEconomics 2023 Analyst Forecast Awards, said “year-on-year inflation is expected to peak in July and anticipated to begin its downward trend in August.”
“With the August and September inflation figures expected to have been released prior to the Monetary Board’s scheduled meetings in the fourth quarter of the year, Metrobank Research maintains its view that the BSP will likely begin its monetary easing cycle in Q4 2024 should the US Federal Reserve start cutting in September 2024,” it said.
Metrobank issues the forecast after inflation rose slower-than-expected at 3.9 percent year-on-year in May from 3.8 percent in April, driven by the increase in the index of the housing, water, electricity, gas and other fuels.
This brought the five-month average inflation to 3.5 percent, within the government’s target band of 2 percent to 4 percent. On a month-on-month basis, inflation rose 0.1 percent in May, after slowing 0.1 percent the previous month.
Core inflation, which excludes selected food and energy items, continued to ease to 3.1 percent in May from 3.2 percent in April.
Meanwhile, Finance Secretary Ralph Recto assured the public that the government is carefully balancing food and non-food inflation mitigation measures by conducting regular reviews and adjustments of policies to ensure that Filipinos’ purchasing power is well protected.
“We are vigilantly tracking persistent inflation drivers and employing a whole-of-government approach in crafting data-driven policy measures to effectively counter their effects in a sustainable manner. Our top priority is to ensure that the majority of Filipinos, especially the poor and vulnerable sector, benefit from these interventions,” he said.
Recto said inflation for the bottom 30 percent of households was higher at 5.3 percent, and rice inflation made up more than 80 percent of this.
“Rest assured, the government is continuously formulating sustainable solutions that will manage the price increases of other commodities and keep inflation within our target range. The solutions on the food security front are guaranteed to work in tandem with our long-term goal of modernizing our agriculture sector,” Recto said.
