Moderate inflation in first quarter likely

‘Key upside risks are associated with potential pressures emanating from higher transport charges, increased electricity rates, higher oil prices, and higher food prices due to strong El Niño conditions’

The Bangko Sentral ng Pilipinas expects inflation this month and the next to further stabilize within its target.

The Philippine Statistics Authority on Tuesday reported January inflation settled at 2.8 percent, lower than December’s 3.9 percent and within the BSP target of 2 to 4 percent.

Disinflation has continued since September’s 6.1 percent, statistics data show.

The BSP believes such trend will be seen until March, mainly due to the mathematical and comparison principle of negative base effects.

“Inflation will likely moderate in the first quarter of 2024 due largely to negative base effects and some easing of supply constraints affecting key commodities,” the central bank said Tuesday in a statement to the media.

Food, non-alcoholic drinks

Prices of food and non-alcoholic drinks dropped to 3.5 percent in January from 5.4 percent in the previous month. This commodity group comprised 47 percent of all the items analyzed by the statisticians.

Meanwhile, utilities and fuels notably posted slower growth in prices at 0.7 percent from 1.5 percent during the period.

However, the BSP said overall prices will likely accelerate briefly in the second quarter as the dry weather threatens to slow agricultural production, apart from a reversal to positive base effects.

Upside risks

“Key upside risks are associated with potential pressures emanating from higher transport charges, increased electricity rates, higher oil prices, and higher food prices due to strong El Niño conditions,” the central bank said.

Inflation could be tempered by possible weak demand for goods and services amid the continuous recovery of households and businesses from the pandemic.

“Meanwhile, the impact of a relatively weak global recovery and the government measures to mitigate the effects of El Niño could ease some price pressures,” the BSP said.

To help ensure inflation remains manageable, the central bank said it is keeping loan interest rates elevated for now, which addresses consumption-induced inflation.

GDP assessment

The BSP added it will assess other factors in the country’s latest gross domestic product before announcing any adjustment to its lending rates.

“Looking ahead, the Monetary Board deems it necessary to keep monetary policy settings sufficiently tight until a sustained downtrend in inflation becomes evident,” it said.

“The BSP will consider the latest inflation and GDP outturns for the Monetary Board’s policy meeting on 15 February 2024,” the BSP added.

PHOTOGRAPH BY KING RODRIGUEZ FOR THE DAILY TRIBUNE A SENIOR citizen buys meat in a wet market in Sta. Ana, Manila on Tuesday despite its still high price, amid the report of the Philippine Statistics Authority stating that the inflation rate in January 2024 eased further to 2.8 percent, well within the government’s target range of 2 to 4 percent.