The Bangko Sentral ng Pilipinas (BSP) projects February inflation to settle within 2.3 to 3.1 percent, within its 2 to 4 percent annual target range.
In a recent advisory, the central bank said upward price pressures could stem from higher prices of rice and fish, elevated domestic petroleum prices, and increased electricity charges in Meralco-serviced areas. It noted, however, that lower prices of vegetables, fruits, and meat, as well as peso appreciation, could partly offset these pressures.
The Philippine Statistics Authority (PSA) reported headline inflation in January at 2.0 percent, up 0.2 percentage points from the previous month and likewise within the central bank’s forecast range for that month. The PSA attributed the modest monthly uptick to faster annual increases in the prices of housing, water, electricity, gas, and other fuels.
Food prices, however, exhibited month-on-month deflation, declining by 0.5 percentage point to 0.7 percent in January, which the BSP attributed to a slower increase in the prices of vegetables, meat, and fish.
With inflation seen as steady for the time being, the BSP’s Monetary Board on 19 February resolved to reduce the central bank’s target reverse repurchase rate (RRP) by 0.25 percentage point—the second rate cut in three months—amid sluggish economic growth following the latest corruption scandal.
“Inflation remains manageable. Our forecasts do indicate a slight uptick in inflation this year, but this is due largely to supply-side factors. While these factors are largely temporary, they will require continued vigilance with regard to possible spillover effects,” said BSP Governor Eli M. Remolona Jr.
The central bank previously announced it will maintain its 2 to 4 percent headline inflation target range for this year and the next.
A recent report from Metropolitan Bank & Trust Company (Metrobank) likewise projects February inflation to remain within the BSP’s target range at 2.4 percent, “owing to low base effects from last year and short-term challenges in rice and onion supply.”
“Food, energy, and rental prices will continue to drive headline inflation in February, with rice and onion prices only partly providing reprieve,” it added.
Metrobank noted that its slightly faster inflation forecast could mean the BSP may need to refrain from cutting rates too deeply, which could support the peso, which appreciated back to the P57 level in February after falling to consecutive record-weak levels against the dollar in the prior month.