September 29, 2023

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Higher oil prices unlikely to ‘disturb’ BSP inflation outlook, says Medalla

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By Keisha B. Ta-asan, Reporter

WASHINGTON — The Bangko Sentral ng Pilipinas (BSP) is confident headline inflation will return to within its 2-4% target by the fourth quarter this year amid a recent spike in global oil prices and still-elevated core inflation.

BSP Governor Felipe M. Medalla told BusinessWorld that even though higher global oil prices is an upside risk to inflation, it won’t “disturb” the central bank’s main scenario.   

“(Higher global oil prices) is one of our upsides. The risk is still there. If something happens… oil becomes the battleground again. But our main scenario won’t be disturbed by this event,” Mr. Medalla said in an interview at the sidelines of the International Monetary Fund and World Bank spring meetings here. 

He said the central bank still sees inflation going below 4% by November or December this year, before normalizing in 2024.   

“Why the confidence? In the past, inflation has a natural tendency to normalize precisely because the central bank is acting on it. In fact, inflation has normalized starting February,” he said in mixed English and Tagalog. 

Inflation slowed for a second straight month to 7.6% in March from 8.6% in February. Still, March marked the 12th month in a row that inflation exceeded the central bank’s 2-4% target band.

The average inflation rate in the first quarter stood at 8.3%, still above the BSP’s full-year forecast of 6%.   

Since May last year, the Monetary Board raised benchmark interest rates by 425 basis points (bps), bringing the key policy rate to a near 16-year high of 6.25%.    

“If we have three very low month-on-month (inflation), then we’re more confident that inflation has peaked in January, and it will continue to normalize. But again, we have to be vigilant that something can happen,” Mr. Medalla said.   

Inflation rose to 8.7% in January, the highest in 14 years.   

BSP Deputy Governor Francisco G. Dakila, Jr. told BusinessWorld in the…


2023-04-11 12:33:02

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