Among the issues that concern the Bangko Sentral ng Pilipinas (BSP) the most, price pressure on food that amplify inflation remain front and center.
In commentaries issued Wednesday in the wake of the 7.6 percent inflation outturn in March, the BSP said: “The effect of supply shortages on domestic food prices remains a concern, while the potential impact of higher transport fares, increasing electricity rates, as well as above-average wage adjustments in 2023 point to the broader-based nature of price pressures.”
Why the BSP pays particular attention to food inflation is because food accounts for the bulk or 51 percent of the consumer price index (CPI) regularly surveyed by the Philippine Statistics Authority (PSA). Its inflation targeting framework is structured such that the consuming public and the economic agents that monitor price movements such as banks and nonbank financial institutions are guided as to the forward path of interest rates that the BSP controls.
The BSP influences inflation by appropriately adjusting the rate at which it borrows from or lends to banks, more known as its policy rates.
According to the BSP, the 7.6 percent inflation rate in March is within its forecast range of 7.4 to 8.2 percent, consistent with the overall assessment that inflation will remain elevated over the near term before gradually decelerating back to target range towards end-2023.
“The balance of risks to the inflation outlook for 2023 and 2024 also continue to tilt significantly towards the upside. On the downside, the impact of a weaker-than-expected global economic recovery continues to be the primary factor that could dampen inflation.
“The BSP will continue to adjust its monetary policy stance as necessary to prevent the further broadening of price pressures as well as the emergence of additional second order effects. T
“The BSP also continues to call for the timely and effective implementation of non-monetary government measures to mitigate the impact of persistent supply-side pressures on inflation.,” it said.
Headline inflation of 7.6 percent in March proved lower than market forecasts of 8 percent, the lowest since September last year when it averaged 6.9 percent, based on PSA data.
