The Bangko Sentral ng Pilipinas said Friday inflation likely eased to as low as 7.4 percent in March from 8.6 percent in February on reduced prices of petroleum and some food commodities.
It said in a statement the March 2023 inflation would likely settle within a range of 7.4 percent to 8.2 percent. The government is scheduled to release the latest inflation data next week.
“The recent rollback in domestic petroleum prices, lower prices of fruits and vegetables as well as the decline in chicken and sugar prices are expected to contribute to easing price pressures during the month,” the BSP said.
It said upward price pressures for the month were expected to come from higher electricity rates in Manila Electric Co.-serviced areas and increased prices of other key food items such as pork, fish, eggs and rice.
“Going forward, the BSP remains prepared to respond appropriately to continuing inflation risks in line with its data-dependent approach to monetary policy formulation,” it said.
The appreciation of the peso against the US dollar helped cushion the impact of imported inflation in recent weeks. The peso closed at 54.36 against the greenback Friday, up by 2.5 percent since the start of the year.
A stronger peso minimizes the local value of imported commodities such as petroleum, wheat and flour, milk and other dairy products, meat, rice, raw materials and capital goods.
Inflation averaged 5.8 percent in 2022, above the government’s target range of 2 percent to 4 percent, as the peso’s value fell 9.34 percent against the dollar last year. It tumbled a record low of 59 a dollar in October, with only the BSP intervention in the foreign exchange market preventing it from trading lower.
Inflation remained a serious concern this year, forcing the BSP to raise on March 23 the key interest rate by 25 basis points to 6.25 percent. Inflation in February slightly eased to 8.6 percent from a 14-year high of 8.7 percent in January.
British financial institution Hongkong and Shanghai Banking Corp. said the liquid domestic financial system was giving the BSP some room to hike interest rates further in the next two policy meetings.
It said despite the global headlines on Silicon Valley Bank and Credit Suisse, the BSP would likely adjust by another 25 basis point the overnight borrowing rate to 6.50 percent in the next Monetary Board meeting on May 18.
“This is because the Philippine financial system remains sound for now, despite the aggressive pace of rate hikes over the past 10 months,” HSBC said.
