Bangko Sentral sees high inflation rate of 8.5 to 9.3% in February; another policy rates hike seen
MANILA – The Bangko Sentral ng Pilipinas (BSP) forecasts February 2023 inflation rate at a high range of 8.5 to 9.3 percent, citing the upside risks from higher prices of cooking gas.
In a statement, the Bangko Sentral said elevated prices of key food items, such as pork, fish, egg and sugar, are also expected the additional drivers of the rate of price increases this month.
The factors, however, are seen to be countered by the lower prices for domestic petroleum, fruits and vegetables, chicken, and beef, it said.
“The peso appreciation could contribute to easing price pressures during the month,” the BSP said in its statement.
This, after the peso strengthened to 54-level against the US dollar in recent weeks.
Later, BSP Governor Felipe Medalla hinted the possibility of a 50 basis points increase in the BSP’s key policy rates remains should domestic inflation rate for February 2023 reached 9 percent.
“Well, the worst case scenario is above 9 (percent). Pag ganun (if that happens) clearly, we have to do something. Now, whether its 25 (basis points) or 50 (basis points) depends on the other data,” Medalla said after the Paleng-QR PH Plus event with the Pasig City government.
The rate of price increases countered expectations for possible peak in December 2022 after the January 2023 figure accelerated to 8.7 percent, a new 14-year high.
“Parang ang hirap sabihin na kapag 9 percent, wala kaming gagawin (it’s hard to say they will not do anything if inflation hits 9 percent),” Medalla said. “Ang gagawin namin most likely (ay) magtaas kami ng policy rate (What we’ll likely do is we’ll increase policy rate).”
Amidst projection that inflation remained elevated in February, the central bank chief reiterated its forecasts for inflation likely returning to within the government’s 2-4 percent target band by the last quarter of the year.
The Philippine Statistics Authority (PSA) is scheduled to release the February 2023 inflation report on March 7.
The BSP forecasts inflation to average at 6.1 percent this year.
It has been hiking its key rates since 2022 to help tame inflation rate, which breached the government’s 2-4 percent target band since 2021 due to supply-side factors
Inflation rate last January accelerated further to 8.7 percent from month-ago’s 8.1 percent. Its rise doused hopes that domestic inflation rate likely peaked last December.
“The BSP will continue to adjust its monetary policy stance as necessary to prevent the further broadening of price pressures as well as the emergence of additional second order effects,” the central bank said.
Its key policy rates have been hiked by a total of 400 basis points to help address the elevated inflation rate.
“The BSP will also continue to monitor closely emerging price developments in accordance with the BSP’s price stability mandate,” the central bank added.
Meanwhile, manufacturers and retailers of key commodities are calling for the institution of creative new measures to ease price pressures as the Bangko Sentral ng Pilipinas expects last month’s inflation to likely hover around the 8.5 to 9.3 percent range.
Steven Cua, president of the Philippine Amalgamated Supermarkets Association, said local food producers need support to lessen the country’s dependence on imported produce.
He said an over-reliance on food that is shipped in from abroad inevitably translates to higher retail prices.
“We really have to develop our own food production capabilities to protect the public against inflation,” he said.
Cua, whose group is composed mostly of medium-sized supermarkets nationwide, agreed that the BSP’s forecast accurately reflects actual price changes at the store front in February.
While volumes being sold by supermarkets remain largely unchanged despite price increases, he said consumers are noticeably inclined towards lower cost or sale items.
Lucito Chavez, president of the Asosasyon ng Panaderong Pilipino, appealed to the administration to offer soft loans and other affordable financing options to struggling community bakers.
He said many small bakeries are becoming “victims of economies of scale” and are unable to compete with large corporate bakeries.
Chavez said big baking corporations, some of which are foreign owned, are able to bulk purchase raw materials at preferential prices.
“Small bakeries cannot price themselves out of the competition despite their higher cost for the same raw materials, so they are forced to moderate their price increases to the point of only breaking even,” he added.