The Bangko Sentral ng Pilipinas (BSP) is anticipated to maintain its ultra-tight monetary policy settings amidst soaring inflation rates. Recent data revealed that inflation spiked for the second consecutive month in March, driven by higher food and transport expenses.
Analysts at Chinabank predict that the Monetary Board will exercise caution during its meeting to prevent any disruption to inflation expectations. They expect the BSP to retain its policy rate on April 8, with potential monetary easing starting in the fourth quarter of 2024.
Despite the increase in inflation, the average price hikes have remained within the central bank’s target range of 2 to 4 percent for the past four months, but approached the upper limit in March.
Rice, a crucial staple for Filipino households, played a significant role in the accelerated inflation last month, with rice inflation reaching a 15-year high of 24.4 percent due to elevated global prices. The BSP warned that inflation could surpass the target range temporarily in the coming quarters due to adverse weather conditions affecting domestic agricultural output.
Economist Aris Dacanay from HSBC Global Research believes that the BSP will maintain its current rates, citing a decrease in demand-side inflation as a factor that reduces the need for adjustments. Japanese investment bank Nomura also noted potential upside risks from legislated wage hikes this year, which could further impact inflation rates.
Nomura suggested that the BSP might delay its cutting cycle to October, aligning with their revised inflation forecasts that anticipate a return to the central bank’s target range by that time.
