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BSP expects faster inflation in September

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The Bangko Sentral ng Pilipinas said Friday inflation in September likely picked up to as high as 6.1 percent from 5.3 percent in August on the back of higher costs of fuel and power.

It said in a statement the September inflation would likely settle within a range of 5.3 percent to 6.1 percent.

“Higher prices of fuel, electricity and key agricultural commodities as well as the peso depreciation are the primary sources of upward price pressures in September,” it said.

Meanwhile, lower rice and meat prices could contribute to downward price pressures for the month, the BSP said.

“Going forward, the BSP will continue to monitor developments affecting the outlook for inflation and growth in line with its data dependent approach to monetary policy formulation,” it said.

The Monetary Board, the policy-making body of Bangko Sentral ng Pilipinas, in its last meeting decided to keep the benchmark interest rate steady at 6.25 percent amid the persistent elevated inflation.

It was the fourth pause for the year by local monetary authorities, but BSP Governor and MB chairman Eli Remolona said a rate hike “remained on the table in November.”

The BSP started to call the monetary policy rate the “Target RRP [reverse repurchase] rate”, after a shift on Sept. 8, 2023 to a variable-rate format with a predetermined offer volume in the auction for the overnight RRP facility.

The interest rates on the overnight deposit and lending facilities were retained at 5.75 percent and 6.75 percent, respectively.

The BSP said its baseline projections showed a slightly higher inflation path. It said inflation was still projected to revert to the 2 percent to 4 percent target range by the fourth quarter of 2023 in the absence of further supply-side shocks.

It said while food and transport prices continued to drive headline inflation, core inflation moderated further, implying an easing in underlying pressures. Inflation expectations remain anchored to the target range over the policy horizon.

Average inflation is now seen to reach 5.8 percent in 2023, up from the previous estimate of 5.6 percent, while the forecast for 2024 was adjusted to 3.5 percent from 3.3 percent. For 2025, the forecast is unchanged at 3.4 percent.

Remolona said the upward adjustments in the 2023 and 2024 inflation projections reflected the spillovers from weather disturbances, rising global crude oil prices and the recent depreciation of the peso.

The Monetary Board noted that recent indicators of domestic economic activity pointed to waning pent-up demand, even as the impact of prior monetary policy tightening continues to weigh on credit.

The BSP raised the policy rates by a total of 425 basis points to 6.25 percent between May 2022 and March 2023, before taking what it called a “prudent pause” during the last four meetings.


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