Manila ups inflation forecast, BSP may increase rate again

MANILA: The Bangko Sentral ng Pilipinas (BSP) is expected to again raise its key policy rate in June, this time by as much as 50 basis points (bps) as the government’s team of economic managers raised their forecast for average inflation in 2022.

The Development Budget Coordination Committee (DBCC) said inflation was now expected to be within the range of 3.7% to 4.7%, which breaches the upper end of the target band of 2% to 4%.

The DBCC comprises the departments of budget and of finance, and the National

Economic and Development Authority. The BSP is also represented as a resource of macroeconomic insight.

Following a meeting on May 24, the DBCC said in a press briefing the inflation forecast range was raised considering the uptick in prices of food and energy caused by ongoing geopolitical tensions from the Russia-ukraine conflict and the disrupted supply chains.

Even then, the inflation forecast for 2023 remained at 2% to 4% and also applied to 2024 and 2025.

The revisions are “consistent with the latest forecasts of other agencies and its deceleration over the medium term,” the DBCC said.

Also, the economic team now expects the benchmark price of Dubai crude oil to be within US$90 (RM396) to US$110 (RM484) per barrel in 2022, considering potential supply disruptions caused by the war in Ukraine.

“Nonetheless, this is expected to decrease to US$80 (RM352) to US$100 (RM440) per barrel in 2023 and US$70 (RM308) to US$90 (RM396) per barrel in 2024 to 2025, as oil supply is expected to catch up over the medium term,” the DBCC said.

Further, the DBCC is now looking at the growth of Philippine gross domestic product (GDP) to settle within 7% to 8%. Previously, the forecast was for GDP growth of up to 9%.

Again, the DBCC cited the war in Ukraine as prompting the revisions, along with slowing growth in China and the normalisation of monetary policy – or the rise of interest rates – in the United States.

— Philippine Daily Inquirer/ann