Metrobank Research on Thursday reduced its inflation forecast in 2023 and 2024, taking into account the continued deceleration of the consumer price index in the past five months.
“With this, Metrobank Research has revised its full-year average inflation estimates to 5.8 percent from 6.0 percent for 2023 and 4.3 percent from 4.5 percent for 2024, as inflation is seen to hit the target range earlier than anticipated, and as the latest print further supports a continuous easing until 2024,” it said in a report.
Inflation in June slowed further to a 13-month low of 5.4 percent from 6.1 percent in May, pulled down by slower increases in the prices of food and non-alcoholic beverages.
This was also slower than 6.1 percent in June 2022.
Inflation averaged 7.2 percent in the first half, still higher than the target range of 2 percent to 4 percent for the year.
Data showed that from a peak of 8.7 percent in January 2023, inflation eased to 8.6 percent in February, 7.6 percent in March, 6.6 percent in April and 6.1 percent in May.
“Inflation in June supports the expectation that prices are on their way down and that inflation will continue to follow a downward trajectory on account of base effects sans supply and price shocks,” Metrobank Research said.
“Inflation is expected to further decelerate in the coming months, falling within the central bank’s target range of 2 percent to 4 percent in the last two months of the year, as base effects and the impact of hikes in the benchmark rates kick in, as well as lower global oil prices on the back of an expected global slowdown,” it said.
Metrobank Research noted that despite the recent decline in both headline and core inflation, elevated inflation might continue to persist due to ongoing upside risks stemming from price constraints on key food commodities such as rice, the potential impact of the recently approved wage hike and the imminent El Niño dry spell.
It said the latest deceleration makes a stronger case for a pause in the RRP rate hikes, which currently stands at 6.25 percent, and for rate cuts to happen as soon as yearend 2023 given that inflation expectations are on a downward trend.
Metrobank Research is the bank’s monthly compilation of insights, features and tips on everything finance from its team of experts.