In its monetary report recently released, the Bangko Sentral ng Pilipinas (BSP) stated that inflation could exceed the 2% to 4% target in the 2nd of half of this year mainly pointing to base effects from easing commodity price pressures, according to a BusinessWorld news report.
To put things in perspective, posted below is an excerpt from the BusinessWorld report. Some parts in boldface…
THE BANGKO SENTRAL ng Pilipinas (BSP) said inflation could overshoot the 2-4% target range in the second half of this year amid base effects.
In its latest Monetary Policy report, the central bank said annual inflation is likely to settle within the 2-4% target band from this year to 2026 amid declining rice prices.
“However, inflation could exceed the target range in the latter part of 2025, primarily due to base effects from easing commodity price pressures in the corresponding period of 2024,” it said.
“Inflation is then projected to move closer to the midpoint of the target range in 2026, supported by an expected moderation in global commodity prices,” it added.
The BSP’s baseline forecasts for inflation are at 3.5% for 2025 to 2026. Accounting for risks, inflation could reach 3.7% in 2026.
In February, the consumer price index (CPI) sharply slowed to 2.1%, bringing headline inflation to 2.5% in the first two months.
For this year, inflationary pressures could come from “higher global oil and non-oil prices, peso depreciation, and recent above-expectation inflation readings,” the BSP said.
However, inflation could breach the 2-4% target range if crude oil prices rise, it said.
BSP estimates show that if crude oil prices average above $100 per barrel, inflation could hit 4.1% this year and 4.8% next year.
Based on the latest Development Budget Coordination Committee macroeconomic assumptions, Dubai crude oil is seen to range from $60 to $80 per barrel this year.
However, the BSP reiterated that risks to the inflation outlook have remained “broadly balanced.”
“Upside risks include potential increases in electricity rates, transport charges, and pork prices,” it said.
According to the BSP’s risk matrix, there is a high probability for a rise in pork prices and a low probability for elevated transport and electricity costs.
“Conversely, the main downside risk stems from the spillover effects of lower tariffs on imported rice to domestic rice prices.”
Rice inflation further decreased to 4.9% in February from the 2.3% drop in January. This was the lowest rice inflation print since the 5.7% contraction in April 2020.
Rice prices are seen to decline further after the Agriculture department declared a food security emergency on rice, as well as lowered the maximum suggested retail price of 5% broken imported rice.
Let me end this post by asking you readers: What is your reaction to this recent development? Do you think the inflation in the Philippines will accelerate in the 2nd half of this year? If you are running a business, how far can you go when it comes to maintaining the current prices of your good and services when inflation kicks in?
You may answer in the comments below. If you prefer to answer privately, you may do so by sending me a direct message online.
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