June inflation could hit 6%amid price hikes–Diokno

THE growth of consumer prices could accelerate to 6 percent in June this year, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said on Thursday, as continued increases in key commodities affect the con-sumer basket.

In a message to reporters, Diokno said inflation could have settled be-tween 5.7 percent and 6.5 percent in June. This means that inflation acceleration is certain from May’s 5.4 percent print.

Diokno said the continued in-crease in domestic oil prices, up-ward adjustment in electricity rates, higher prices of key food items, and peso depreciation are the primary sources of inflationary pressures during the month.

The BSP has raised their oil price forecasts for the year, which largely affects inflation for this year and the next. The Central Bank’s latest forecast on crude oil prices is for it to settle at $106.30 per barrel, up from the $104.04 per barrel forecast in May. For next year, crude oil is expected to hit $95.30 per barrel, from the $89.50 per barrel forecast in May.

BSP officials said a Dubai crude oil price of $90 per barrel in 2023 is the threshold at which inflation may be expected to decelerate back to within target for that year.

Earlier this week, the peso also crossed the P55 territory, marking its weakest state against the US dol-lar in more than 16 years.

“Looking ahead, the BSP will con-tinue to closely monitor emerging price developments to enable timely intervention to arrest emergence of further second-round effects, con-sistent with BSP’s mandate of price and financial stability,” Diokno said.

In its June meeting, the BSP said it expects inflation to average at 5 percent for this year, revised from the earlier forecast of 4.6 percent in May. The country’s inflation target for this year and next year is at 2 to 4 percent.

The BSP also earlier announced that inflation will breach the target for 2023, and is expected to average at 4.3 percent for next year. This is an upward adjustment to their within-target forecast of 3.9 per-cent in May.

These mounting inflationary pressures are expected to lead to more rate hikes from the Central Bank. In its research note earlier, Fitch Solutions—the research arm of the Fitch Group - said it now expects the BSP to raise its rates to 3.25 percent for this year. This is a more aggres-sive monetary tightening path than the earlier forecast of 2.75 percent by the end of the year.