Moody’s Analytics, a unit of Moody’s Corp., said Monday it expects the Bangko Sentral ng Pilipinas to keep the policy interest rate steady at 6.25 percent for the rest of the year because of the easing inflation.
Inflation rate in August picked up to 5.3 percent from 4.7 percent in July on higher prices of food and non-alcoholic beverages. This brought the average in the first eight months to 6.6 percent, above the 2023 target range of 2 percent to 4 percent.
“Despite that, we expect inflation to ease over the coming months and touch the higher bound of BSP’s [Bangko Sentral ng Pilipinas’] 2 percent to 4 percent target by the end of the year,” Moody’s Analytics said.
“Unless inflation across food and energy proves to be stickier than expected, the central bank is likely to hold rates steady for the rest of the year and cut rates from the first quarter of 2024,” it said.
It said the higher inflation in August was largely due to higher prices of rice, the main staple food in the Philippines. Adding to the problem were the recent typhoons that swept through northern Luzon provinces, damaging crops such as rice and corn.
The National Economic and Development Authority Secretary Arsenio Balisacan earlier assured the public that the government would strengthen its measures to ensure food security, protect consumers and provide assistance to farmers.
Rice inflation increased to 8.7 percent in August from 4.2 percent in July 2023. The expected reduction in rice production due to El Niño and the export ban imposed by major rice exporters such as India and Myanmar led to higher international rice prices, Balisacan said.
BSP Governor Eli Remolona said earlier that there was still room to increase interest rates to rein in inflation, when necessary, without negatively impacting the economy.
Remolona considered the third pause of the Monetary Board on Aug. 17, 2023 as a “prudent” move.