Metro Manila (CNN Philippines, November 23) — Inflation is expected to surpass the latest forecast of the Bangko Sentral ng Pilipinas for 2022 but still within the full-year target band, two international think tanks reported.
“We see 2022 inflation averaging higher, at 3.7%, but the headline should fall comfortably below the upper bound of the target range from July,” said Pantheon Macroeconomics senior Asia economist Miguel Chanco in a report on Tuesday, also stating near-term inflationary pressures will “remain acute.”
The figure is above the 3.3% inflational projection retained by the BSP’s policy-making Monetary Board during its meeting this month. The board also kept its 3.2% forecast for 2023.
Chanco noted that the board’s statement during its November meeting “sounded slightly more hawkish.” He also noted how it warned that the BSP’s inflation forecast had shifted towards the upside for 2022, and assured it is ready to address potential second-round effects from supply-side pressures.
Fitch Solutions also expects inflation to average 3.7% during the year, near the upper end of the government’s 2-4% target band for 2022.
To date, inflation has remained above target for three straight months now — logging a 4.6% pace in October. Its average so far this year is at 4.5%.
“However, with the Philippines still in the process of relaxing domestic Covid-19 restrictions and vaccinating its population, the economic normalisation process will stretch into 2022. As such, we believe the BSP will take a gradual approach to monetary policy normalization,” said the Fitch unit.
With this, the American organization expects the BSP to resume hiking rates in 2022 — with the yearend figure rising to 2.75% from the current 2%. A higher core inflation along with a strong recovery in producer prices could lead to a “more aggressive monetary tightening cycle from the BSP,” it added.
But Pantheon Macroeconomics sees a different path for the central bank.
“[T]he BSP likely will be one of the central banks in Emerging Asia which will maintain the status quo through 2022. We disagree with the prevailing wisdom that the Board will join the chorus of normalisation from Q3,” said Chanco, citing the likelihood of economic growth slowing down next year.
The Monetary Board will hold its last policy meeting for 2021 on Dec. 16. It has held rates constant since the surprise rate cut in November last year.
