DOF, BSP see inflation staying within range

THE country’s inflation is expected to peak in the third quarter before slowing down in the fourth quarter of this year, Finance Secretary Benjamin E. Diokno said on Tuesday, as the Bangko Sentral ng Pilipinas (BSP) signalled it will take further action to curb inflation, even after back-to-back hikes in recent months.

The statement came after the government announced that local inflation hit 6.3 percent in August, easing slightly from the 6.4 percent in the previous month.

Despite his projection of inflation peaking in the third quarter, Diokno said they still expect inflation to settle within

the Development Budget Coordination Committee (DBCC) projected range for this year.

“Inflation is still expected to remain elevated for the rest of 2022, peaking in Q3 but slower in Q4, but is seen to fall within the 4.5-5.5 percent DBCC assumption for 2022,” he said in a tweet on Tuesday following the Philippine Statistics Authority’s (PSA) report on the August inflation.

The 6.3 percent in August is slower compared to July’s 6.4 percent but remained higher than the 4.4 percent posted in August 2021.

Year-to-date, inflation averaged 4.9 percent, still beyond the government’s target band of 2 to 4 percent.

“The PSA reported that headline inflation slightly decelerated to 6.3 percent in August, while year-to-date inflation stood at 4.9 percent. This is driven by persistent high prices of food and transport,” Diokno said.

The Finance chief vowed that the government will continue providing targeted support to those affected by elevated prices of fuel and key commodities. He also affirmed the government’s commitment to boosting local food production.

“Measures include fuel subsidies for the transport sector, fuel discounts for farmers and fisherfolk, and social pension for indigent senior citizens,” he said. “The government is also committed to implementing measures to improve productivity and local production and ensure the adequate supply of food in the domestic market.”

BSP policy actions

Meanwhile the BSP said in a statement that its recent policy actions

“are intended to bring inflation and inflation expectations back to the target to ensure the balanced and sustainable growth of the economy in the medium term. The BSP is prepared to take further policy actions to bring inflation toward a target-consistent path over the medium term, consistent with its primary objective to promote price stability.”

In July, the BSP tightened its monetary policy via an off-cycle hike of 75 basis points. A month after, in its scheduled meeting in August, it unleashed a fresh 50 basis point hike in its main benchmark rates.

The BSP said while the August inflation remains elevated, it is still within the level of their expectation for the month.

“The August 2022 inflation outturn of 6.3 percent is within the BSP’s forecast range of 5.9 to 6.7 percent, consistent with the BSP’s assessment of elevated price pressures over the near term due to broadening price pressures. The uptick in inflation remains supply-driven, but signs of broadening price pressures are also being noted,” the Central Bank said.

With the latest development, the BSP said its baseline projections continue to indicate above-target inflation in 2022, with inflation decelerating back to the target in 2023 and 2024 following the recent BSP policy rate hikes.

“At the same time, upside risks continue to dominate the inflation outlook in the near term due to the potential impact of higher global non-oil prices, the continued shortage in domestic fish supply, the sharp increase in the price of sugar, as well as pending petitions for transport fare increases,” the Central Bank said.

“Meanwhile, the impact of a weaker-than-expected global economic recovery as well as the resurgence of local Covid-19 infections are the main downside risks to the outlook,” it added.

The BSP said in its statement that it will continue to “carefully monitor and assess” pertinent economic developments that could affect the price dynamics and growth prospects of the country.

“The Monetary Board will update its assessment of the macroeconomic outlook as well as conduct its review of the monetary policy stance on September 22, 2022,” the BSP said.

Image credits: Junpinzon |

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