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BSP expects inflation in April at 3.5-4.3%

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BSP expects inflation in April at 3.5-4.3%

By means of Luisa Maria Jacinta C. Jocson, News reporter

HEADLINE INFLATION May accelerated further in April and may have exceeded the 2-4% target, the Bangko Sentral ng Pilipinas (BSP) said.

The central bank’s monthly forecast showed that inflation was likely to remain within a range of 3.5% to 4.3% in April. This is slower than the 6.6% print in April 2023.

The top end of the forecast would exceed the 2-4% target for the first time in four months.

On the other hand, the downside would be slower than the 3.7%Frecorded in March.

The Philippine Statistics Authority (PSA) is expected to release in AprilFdata on May 7.

“Continued price increases for rice and meat, together with higher gasoline prices and the depreciation of the peso are the main sources of upward price pressure for the month,” the BSP said in a statement on Tuesday.

The latest data from the Department of Agriculture shows that local well-milled rice averaged P45-P55 per kilo as of April 29, compared to P39-P46 a year ago. A kilo of plain white rice had an average value of P46-P52 as of April 29, compared to P34-P42 a year ago.

For the month of April, pump price adjustments amounted to a net increase of P2.25 per liter for gasoline and P0.50 per liter for diesel. Kerosene prices declined net by P0.80 per liter.

Earlier this month, the peso fell to the P57 level for the Ffor the first time in almost 17 months or since November 2022.

BSP Governor Eli M. Remolona Jr. previously said the BSP “stands ready to control unnecessary moves and excessive volatility.” He also noted that the peso’s recent performance is due to the strength of the US dollar during the Middle East controversyFlic.

“Meanwhile, lower prices from Ffish, fruit, vegetables, as well as lower electricity rates and the rollback of LPG (liqueF(petroleum gas) prices can oFto offset upward price pressure,” the BSP added.

Manila Electric Co. (Meralco) reduced its overall rate by P0.9879 per kilowatt hour (kWh) to P10.9518 per kWh in April from P11.9397 in March due to a decline in generation and transmission costs.

LPG prices were also lower this month. Petron Corp. has rolled back LPG prices by P1 per kilogram for April.

Robert Dan J. Roces, chief economist at Security Bank Corp., said in an email note that food inflation will remain a “significant factor.”Ficant driver” from overalls inFuntil July.

“Once the basic eFfect of foodF“If inflation starts to fade and moderate in August, the central bank may have more flexibility to adjust its monetary policy stance depending on broader economic conditions,” he said.

Eat insideFInflation rose to 5.7% in March, the fastest print in four months or since 5.8% in November 2023.

Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp., also noted that palay (unmilled rice) prices have increased due to the El Niño dry spell.

The agricultural damage caused by the El Niño reached 4.39 billion euros on April 23. Rice losses amounted to 2.71 billion euros, accounting for 62% of total agricultural damage.

Rice grows in it in MarchFThis percentage increased to 24.4%. This was the fastest print since the 24.6% in February 2009.

POLICY PAUSE
Meanwhile, the central bank said it will “continue to monitor developmentsFwhich the prospects forFand growth in line with the data-dependent approach to monetary policy decision-making.”

Mr Roces said the central bank was likely to extend its policy pause at its next meeting.

“Given the high inflation rates, we expect the BSP to take a proactive approach at their upcoming policy meeting on May 16, where we expect stable interest rates,” he said.

The Monetary Board held its fourth consecutive meeting in April and kept the benchmark interest rate at a nearly 17-year high of 6.5%.

From May 2022 to October, the Monetary Board increased borrowing costs by 450 basis points.

The BSP is likely to maintain its aggressive tone “to demonstrate their commitment to price stability,” Roces said.

“InsideFIf the BSP is expected to exceed the target in subsequent months, it will maintain tight monetary policy to anchor inflation expectations and avoid a second round.Ffects,” he said.

Mr Roces said the BSP may have more room to ease policy in the second halfFThe pressure starts to decrease.

Mr. Ricafort also noted that some U.S. Federal Reserve officials have recently expressed caution about cutting interest rates, “particularly by ensuring thatFThis policy is well anchored toward the Fed’s 2% target.”

The Fed’s two-day policy meeting ends Wednesday (May 1).