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  • By The Financial District

BSP Sees 8.6% Dec. Inflation Rate

The Bangko Sentral ng Pilipinas (BSP) has forecasted that inflation could peak at 8.6% for the month of December due to higher power rates and increased prices of meat, fish, and select agricultural products.


Photo Insert: While BSP Governor Felipe M. Medalla announced earlier that inflation will peak in December, the central bank also noted that the stronger peso vis-à-vis the US dollar in recent weeks.



In a statement on Thursday, Dec. 29, the central bank projected an inflation band of 7.8%-to-8.6% for December. The highest monthly inflation for the year was recorded last November at eight percent.


“Upward price pressures for the month are expected to emanate from higher electricity rates, uptick in the prices of agricultural commodities, elevated meat and fish products, and higher LPG prices,” said the BSP.



While BSP Governor Felipe M. Medalla announced earlier that inflation will peak in December, the central bank also noted that the stronger peso vis-à-vis the US dollar in recent weeks, as well as the lower prices of rice and petroleum, could still ease price pressures for the month.


Medalla said that the December peak is “almost sure”, and not January 2023, because of base effects. The BSP had thought previously that inflation will peak in October but typhoons and consistent weather disturbances continued to affect supply chains.


All the news: Business man in suit and tie smiling and reading a newspaper near the financial district.

Medalla also pointed out that the exchange rate at the P55 level is no longer a source of concern as far as inflation is concerned. The BSP has been buying US dollars for months, costing the central bank $15 billion in reserves to prop up the peso, which hit a record low of P59 last Sept. 29.


As of end-November, the inflation year-to-date average is 5.6%. The BSP forecasts average inflation of 5.8% for 2022, 4.5% in 2023, and 2.8% in 2024.


Business: Business men in suite and tie in a work meeting in the office located in the financial district.

Despite these numbers, Medalla expressed confidence that inflation will slow down in the next months after peaking in December due to the easing global oil and non-oil prices, negative base effects, and the impact of BSP’s 350 basis points (bps) cumulative policy rate adjustments in 2022.


It expected the inflation path to return to within the target band of two percent to four percent by the third quarter this year and will approach the lower end of the range by mid-2024. As of Dec. 15, the policy rate stood at 5.5%.


Market & economy: Market economist in suit and tie reading reports and analysing charts in the office located in the financial district.

The BSP said that the risks to the inflation outlook continue to be on the upside for 2023 but remain broadly balanced for 2024.


The key upside risks are the potential impact on international food prices of higher fertilizer prices, trade restrictions, and adverse global weather conditions. The higher food prices such as sugar and meat due to bad weather and supply disruptions are also upside risks, including pending petitions for transport fare hikes. The downside risks continue to be the impact of a weaker global economic recovery.



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