The Bangko Sentral ng Pilipinas (BSP) is not likely to cut interest rates soon because of the persisiting upside inflations risks.
BSP Governor Eli Remolona, in a news briefing Wednesday, also ruled out further tightening of interest rates.
“The models and the data seem to suggest that it’s still too soon to declare victory [over inflation]. We seem to be on our way, but there’s not enough data to assure us that we will settle comfortably within our target range of between 2 and 4 percent,” Remolona said.
“The main thing is still whether there are upside risks, supply side shocks, whether there’s going to be more of them, and whether they will cause second-round effects,” he said.
Inflation rate in February picked up to 3.4 percent from 2.8 percent in January on higher food, beverage and transport prices, the Philippine Statistics Authority (PSA) said Tuesday.
Average inflation from January to February 2024 reached 3.1 percent, higher than the government’s full year target of range of 2 percent to 4 percent.
“It’s on the edge, so I can’t say that we’re gonna ease soon. I think it’s unlikely that we will tighten some more. But we’ll see what the data says,” said Remolona.
The PSA traced the uptrend in the overall inflation in February to the higher year-on-year increase in the heavily-weighted food and non-alcoholic beverages at 4.6 percent during the month from 3.5 percent in January.
Food inflation at the national level rose to 4.8 percent in February from 3.3 percent in January, caused by higher prices of rice and meat, the agency said.
Data showed that on a month-on-month seasonally adjusted basis, headline inflation increased to 0.9 percent in February from -0.1 percent in the previous month.
Core inflation, which excludes selected volatile food and energy items and measures underlying demand-side price pressures, decelerated further to 3.6 percent year-on-year in February from 3.8 percent in January.
Analysts earlier predicted the BSP would start cutting rates in the second half of the year on the back of falling inflation.
The BSP in its last Monetary Board meeting kept the benchmark interest rate steady at 6.5 percent amid easing inflation and strong domestic demand.
It said it would continue to monitor how firms and households were responding to tighter monetary policy conditions alongside evolving domestic and external economic conditions.
The BSP said February inflation outturn was consistent with its expectations that inflation would likely remain within the target range in the first quarter, but could temporarily accelerate slightly above the target range from the second quarter due to the adverse impact of El Niño weather conditions on agricultural production and positive base effects.