Philippines to bring inflation below 4% by Q3 —BSP chief

January 24, 2023 - 9:34 AM
Bangko Sentral ng Pilipinas headquarters in Manila. The central bank’s first quarter Consumer Expectations Survey (CES) for 2018 showed an index of 1.7 percent, down from the previous quarter’s 9.5 percent and year-ago’s 8.7 percent. (Reuters file photo)

Annual inflation at 14-year highs in the Philippines will likely ease to below 4% by the third quarter and then 2% by early next year, as aggressive tightening and supply-side intervention take root, its central bank governor said on Monday.

“We expect to be very successful in bringing down inflation,” Bangko Sentral ng Pilipinas Governor Felipe Medalla told an investment forum in Frankfurt.

Medalla said the high inflation was fuelled by supply shocks, so the government’s plan to speed up the importation of certain commodities like onion and sugar, on top of tighter policy, should help tackle soaring prices.

President Ferdinand Marcos Jr, who is also agriculture minister, said he was determined to slow the pace of inflation, which last month quickened to a fresh 14-year high of 8.1%.

“What I lose sleep every night over is how to bring down inflation,” he said in interview shown on the Facebook page of state-controlled PTV.

Marcos recently approved the emergency importation of onions to address skyrocketing prices that have contributed to inflation, but said it would take a while before the measure would have an impact.

Retail prices of onions surged to as high as 700 pesos ($12.83) per kilogram in recent days in Manila markets, among the highest in the world, according to some economists.

Food prices helped push the consumer price index last month up 8.1% from a year earlier, the fastest rise in 14 years, bringing full-year average inflation to 5.8%, outside the central bank’s 2%-4% target range.

BSP’s Medalla has signaled further interest rates hikes at the central bank’s first two policy meetings this year to bring inflation back within a target range of 2% to 4%.

The BSP, which raised its benchmark interest rate PHCBIR=ECI by a total of 350 basis points last year, will hold its first policy meeting of 2023 on Feb. 16.

($1 = 54.5800 Philippine pesos)

—Reporting by Neil Jerome Morales and Karen Lema in Manila; Editing by Martin Petty