BSP: Jan inflation likely hit 7.5-8.3%

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NFLATION could have accelerated to 8.3 percent last month or slowed to 7.5 percent, the Bangko Sentral ng Pilipinas (BSP) said on Tuesday.

“Upward price pressures are expected to emanate from higher electricity rates, approved water rate rebasing, higher domestic petroleum prices, uptick in the prices of key food items and the annual increase in sin taxes,” the central bank said in a statement.

“Meanwhile, the reduction in LPG (liquefied petroleum gas) prices as well as the peso appreciation could contribute to easing price pressures for the month,” it added.

Inflation hitting 8.3 percent would be the highest in just over 14 years or since December 2008’s 8.7 percent. A 7.5-percent result, meanwhile, would be the lowest in three months and a significant deceleration from December 2022’s 14-year high of 8.1 percent.

Official January inflation data will be released by the Philippine Statistics Authority next Tuesday,

February 7. The data will be considered by the BSP’s policymaking Monetary Board when it meets on February 16 to discuss whether or not to keep raising interest rates.

Key BSP interest rates were raised by a total of 350 basis points last year as inflation surged, breaching the central bank’s 2.0- to 40-percent target range and hitting the government’s upwardly revised 2022 forecast of 5.8 percent. The official assumption for this year is 4.5 to 5.5 percent.

Ahead of the February 16 policy meeting, the central bank said that it would “continue to adjust its monetary policy stance at the necessary pace to prevent the further broadening of price pressures and monitor emerging price developments closely in accordance with the BSP’s price stability mandate.”

Top priority

At a forum organized by The Manila Times on Tuesday, Finance Assistant Secretary Eufrocinio Bernabe Jr. said that tempering inflation was the number one priority of the government.

In addition to BSP monetary policy adjustments, he said the government was working to improve fiscal discipline, boost productivity, help typhoon-hit areas recover and provide targeted support to the most vulnerable, among others.

“We will also manage the temporary importation of certain commodities like sugar, onions, eggs and the like that contribute so much to inflation,” Bernabe said.

ING Bank Manila senior economist Nicholas Antonio Mapa, meanwhile, told the Times that inflation would stay above target for “the most part of 2023” but still slow from last year’s highs.

“The fact that inflation has ‘infected’ the majority (70 percent+ of the CPI basket) suggests that this current inflation episode is broadbased and well-entrenched. This would lead to inflation staying ‘sticky’ or meaning slow to come down sharply,” Mapa said.

He added that attention should be paid to rice prices, which have been rising over the past half year.

Prices are “currently at 3.4 percent year on year and within target but once that number goes higher, we’ll see more hype and attention on rice, given how important it is to the Filipino’s diet,” he added.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said inflation likely eased last month given that the seasonal increase in holiday demand and spending was over and done in December.

“Higher base or denominator effects ... could mathematically lead to slower year-on-year inflation for the coming months of 2023,” Ricafort said, with consumer price growth likely to slow to 3.0 to 4.0 percent in the second half.