BSP sees inflation heating up to within 4.2%-5% in April

The Bangko Sentral ng Pilipinas (BSP) estimates that nationwide inflation may have revved up to with the range of 4.2 percent to 5 percent year-on-year in April, mainly with rising prices of energy and food.

Headline inflation rose from 3 percent in January and February to 4 percent in March, bringing the first-quarter average to 3.4 percent.

Based on the BSP’s projection, the turnout for April will bring the average closer to the upper end of the government’s target band of 2 to 4 percent.

With the first-quarter results so far, policymakers have forecast the full-year average to hit 4.3 percent.

BSP Governor Benjamin Diokno said on Friday higher electricity rates in the service areas of Manila Electric Co.—Metro Manila, Bulacan, Cavite and Rizal, plus parts of Pampanga, Batangas and Quezon province—as well as increased domestic petroleum prices and higher meat and fish prices were the primary sources of inflationary pressures in April.

Diokno said an uptick in April was also more likely because of low base numbers in March.

These factors that are driving up inflation could be offset by lower prices of fruits and vegetables and the broadly stable peso, the BSP chief said.

“Looking ahead, the BSP will continue to monitor emerging price developments and possible second-round effects to help achieve its primary mandate of price stability that is conducive to balanced and sustainable economic growth,” Diokno reiterated.

By second-round effects, he was referring to factors such as higher transport costs, particularly for the riding public, and higher wages.

Earlier this week, ING Bank’s senior Philippine economist Nicholas Mapa reiterated their call for the BSP to start raising its key policy rate, which has been at a historic low of 2 percent since November 2020.

Mapa said inflation was likely to breach the target as early as April, and that the Monetary Board should start tightening—or raising rates—as early as June.

—Ronnel W. Domingo