BSP Raises 2023 Inflation Forecast

The Bangko Sentral ng Pilipinas (BSP) will likely raise its average inflation forecast for this year after the faster-than-expected headline print in January.

Photo Insert: During a recent Senate hearing, BSP Deputy Governor Francisco G. Dakila, Jr. said that the Monetary Board “will take the January inflation into account."

During a recent Senate hearing, BSP Deputy Governor Francisco G. Dakila, Jr. said that the Monetary Board “will take the January inflation into account."

“The January inflation was higher than what we had projected. The BSP’s projection for January was only up to 8.3%, but inflation rose to 8.7%, so it was above our projected range,” Mr. Dakila said.

Asked if the 4.5% inflation forecast for 2023 will be increased, Dakila said: “Most likely.” Headline inflation quickened to 8.7% in January from the 8.1% in December, marking the highest in 14 years or since the 9.1% in November 2008.

It was above the BSP’s forecast range of 7.5-8.3% and marked the 10th consecutive month inflation was above the central bank’s 2-4% target.

The BSP is widely expected to hike borrowing costs Feb. 16, Thursday. In a recent poll, nine analysts said they expect a 50-basis-point (bp) rate increase, while eight analysts anticipate a 25-bp increase.

“By next year, our projection is that inflation would be within target because our sources of inflation are driven by supply, but we still see some spillovers to the demand (side),” Dakila added.

At the last Monetary Board meeting in December 2022, the BSP said it expects inflation to ease to 2.8% in 2024. The BSP raised interest rates by 350 bps since May 2022, bringing the overnight repurchase rate to a 14-year high of 5.5% last year.

The central bank is also ready to adjust policy stance as necessary “to keep further second-round effects at bay and prevent inflation expectations from becoming disanchored,” BSP Governor Felipe M. Medalla had said earlier.

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