Inflation may exceed central bank target of 2-4% in second half due to rising global oil prices, Bangkok Central Governor of the Philippines (BSP) BenBail e. Diocono made the announcement on Tuesday.
“Inflation is expected to stabilize above the target in the second half of 2022 due to the positive impact of global oil prices and rising oil prices,” he said in an online briefing.
“Subsequently, the first quarter of 2023 is expected to fall below the inflation target, before the remaining quarter of 2023 continues to decline, as oil and non-oil prices are expected to fall,” he added.
Headline inflation rose sharply from 3% in February to 4% in March, in line with the upper end of the BSP’s 2-4% target. This was driven by the effects of the Russia-Ukraine war on oil prices.
At its March 24 meeting, the BSP raised its inflation forecast for 2022 and 2023 to 4.3% and 3.6%, respectively, considering higher oil and commodity prices.
Inflation exceeded the 2-4% target in 2021, while it accelerated to 4.5% in 2020 due to a supply of less than 2.6% pork.
The decision to keep the BSP’s rate record low was “recovery is still in its infancy” and the economy is still below its full potential, central bank officials said.
“In our assessment, we will reach the 2019 Gross Domestic Product (GDP) level by the second half of this year,” said Geno Ronald R. Abenoza, managing director of the BSP Department of Economic Research.
“It’s not really strong enough to push insideflation It really is the supply side factor that really existsflTo enterflWe are seeing this right now and in the near future, “he added.
However, calls are being made to increase transport fares and minimum daily wages.
“In view of the possible expansion of price pressures in the near term, BSP is ready to implement timely and appropriate monetary policy measures in line with its pricing. StayThe order of financial stability, “said Mr Diokno.
The next policy meeting of the central bank will be on 19 May.
In a separate note, Sanjay Mathur, chief economist at ANZ Research for Southeast Asia and India, and economist Debalika Sarkar said they now expect the central bank to raise interest rates by 125 basis points (bps) this year, up from 25 bps earlier this year.
It said the BSP would probably start hiking by 25 bps in June, following similar steps at their meetings on August 18, September 22, November 17 and December 15.
“It simply came to our notice then [inflation] The risks are not insignificant due to the limited financial intervention in controlling oil prices as well as the potential increase in the pricing capacity of companies, ”analysts said.
They say the postponement of taxes on fuel products may require greater policy action to address rising oil prices.
The government has rejected calls for an end to excise duties on energy products and has instead provided energy subsidies to the transport and agriculture sectors.
“However, concerns about the potential revenue loss and consequent deterioration of financial health are predominant, especially when the government is working hard on fiscal targets,” ANZ analysts said. – Loose Wendy T. Nobel