Metrobank: Inflation to top target in 2024

INFLATION will likely average lower this year but remain higher than targeted, Metrobank Research said.

It forecast a full-year result of 4.3 percent, down from 2023’s 6.0 percent but slightly over the government’s 2.0- to 4.0-percent target.

Inflation, which surged to a 14-year high of 8.7 percent in January last year, finally returned to target in December. It slowed further at the start of 2023 but picked up in February to 3.4 percent.

Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. last week said that inflation could rise further in March to 3.9 percent.

The central bank has also warned that the rate could again top 4.0 percent in the second quarter due to the impact of the El Niño weather pattern on food prices.

Metrobank Research echoed this, saying: “There continues to be strong upward inflation pressure for the year due to the rising rice prices and the impending effects of El Niño on food items and of emerging geopolitical risks on global market prices.”

March inflation data will be released Friday next week.

Despite the likelihood of abovetarget inflation this year, Metrobank Research still expects the BSP to begin lowering key interest rates later this year.

The central bank’s benchmark rate currently stands at 6.5 percent, the highest since 2007, following a total of 450 basis points of hikes beginning May 2022.

“Relative to the US Federal Reserve’s (Fed) interest rate path, the BSP is likely to delay its first cut by up to a full quarter later than that of the Fed,” Metrobank Research said.

The BSP will likely cut by up to 100 basis points, it added.

“While the BSP is expected to ease monetary policy, high borrowing costs may keep investment spending and imports tempered,” Metrobank Research continued.

The peso-dollar rate could revisit the $56:$1 level in the second and third quarter this year on account of higher imports, while seasonal trends such as higher overseas Filipino worker remittances ahead of the Christmas holidays would support a peso strengthening in the fourth quarter.

The currency will likely end the year at P54 to the dollar, Metrobank Research said.