BSP pegs March inflation at hotter 3.4-4.2%

Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona. FILE PHOTO

MANILA, Philippines — There’s a chance that the stubbornly high prices of rice—worsened by more expensive meat and oil—pushed up inflation beyond the 2 to 4 percent target range of the Bangko Sentral ng Pilipinas (BSP) anew, which may prompt monetary authorities to stay hawkish.

In a statement on Monday, the BSP said inflation possibly settled at between 3.4 and 4.2 percent last month. Should the figure scheduled to be released on April 5 match the upper-end of the BSP’s forecast range, inflation in March would be faster than the 3.4 percent print in February.

At the same time, price gains in March would once again breach the central bank’s target band after staying within range for three straight months.

“Continued price increases of rice and meat along with higher domestic oil prices and electricity rates are the primary sources of upward price pressures for the month,” the BSP said.

READ: Rice, onion prices start dropping after months of remaining high – DA

“Meanwhile, lower prices of fruits, vegetables and fish along with the peso appreciation could contribute to downward price pressures,” it added.

A further uptick in inflation would likely convince the BSP to stay hawkish for much longer to avoid upsetting inflation expectations.

Prudent move

At its meeting in February, the Monetary Board left its key rate unchanged at 6.5 percent—the highest in almost 17 years—in what the BSP called a “prudent” move amid persistent risks to the inflation outlook.

READ: In a ‘prudent’ move, BSP keeps key rate at 6.5%

The BSP had said inflation would ease this first quarter before overshooting the target anew in the second quarter as favorable base effects fade. Average price hike is projected to return to the target band in the third quarter to average 3.6 percent this year.

According to Governor Eli Remolona Jr., the urge to stay hawkish—or keep rates high—is also preventing the BSP from further slashing banks’ reserve requirement ratio, which would inject more liquidity into the local financial system and may potentially stoke inflation.

But the BSP chief said the central bank would not wait for the US Federal Reserve to cut rates before making its own easing moves.

“Going forward, the BSP will continue to monitor developments affecting the outlook for inflation and growth in line with its data-dependent approach to monetary policy decision-making,” the BSP said. INQ