Bank officials: Inflation will peak before slowing down

Food prices are expected to soar following the continued rise in inflation. Above, a market vendor in Quezon City counts the day’s earnings on Sunday. | PHOTOGRAPH BY YUMMIE DINGDING FOR THE DAILY TRIBUNE

Economists said that inflation in the country would likely accelerate further in the fourth quarter of this year.

In a television interview, China Bank chief economist Domini Velasquez said there is a “small reprieve of inflation slowing down” for the rest of the year.

“We think there’s room for inflation to go up a little bit more in the fourth quarter,” Velasquez said.

For his part, Rizal Commercial Banking Corp. chief economist Michael Ricafort told Daily Tribune in a Viber message that there is a chance that year-on-year inflation could have already topped out in the fourth quarter of 2022.

“(Inflation) would start to ease gradually thereafter and could even ease year-on-year significantly, especially starting (the first quarter of) 2023,” Ricafort pointed out.

He added that the country’s inflation could still peak around the fourth quarter of this year at around eight percent and could mathematically ease after that next year.

“Year-on-year inflation (will) further ease in 2Q-3Q 2023 (because of) the anniversary of local wage hikes and transport fare hikes that started in June-July 2022 and the second-round inflation effects that followed shortly thereafter,” Ricafort mentioned.

Last Thursday, the BSP revised its average inflation projection from 5.4 percent to 5.8 percent for this year and its forecast for 2023 from 4 percent to 4.3 percent.

According to Velasquez, BSP is looking “more concerned” about the inflationary expectations and the impact of the peso depreciation on inflation.

“These (good things) will benefit us in the next few months,” Velasquez said.

BSP’s bet on inflation

For his part, Bangko Sentral ng Pilipinas Governor Felipe Medalla said he is “willing to bet a lot” that inflation won’t go above eight percent in November or December this year.

“Bet on it, (inflation will) not (exceed) eight percent; even if it does, it will start going down by next year. By the second half of next year, inflation will be closer to three than four. Of course, that’s assuming that there are no new supply shocks,” Medalla said.

The BSP anticipates inflation to average 5.8 percent for 2022 and 4.3 percent for 2023, both forecasts exceeding the government target range of two percent to four percent, according to the most recent November 2022 Monetary Policy Report, which was presented during the monetary policy briefing. The BSP predicts that inflation will decelerate to 3.1 percent by 2024.

The majority of the variables that led to the high inflation rate in October, according to Medalla, were one-time shocks. He added that food prices often result in a “rate of increase that eventually normalizes,” even if prices do not decrease.

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