Dutch financial giant ING Bank expects the Bangko Sentral ng Pilipinas (BSP) to step on the brakes and pause from its aggressive tightening cycle at the rate-setting meeting of the monetary board as inflation slowed to its lowest level in six months.
Nicholas Mapa, senior economist at ING Bank, said in a commentary that BSP Governor Felipe Medalla previously mentioned that he would consider a pause at the next policy meeting should prices begin to fall and should headline inflation show signs of heading back towards the target convincingly.
“Today’s inflation reading could be one additional data point that could convince governor Medalla that inflation is finally moderating. We expect inflation to moderate further in April which could open up the door for a BSP pause at the May meeting,” Mapa said.
Inflation averaged 8.3 percent in the first quarter of the year, well above the central bank’s two to four percent target, despite easing significantly to 7.6 percent in March from 8.6 percent in February.
The consumer price index (CPI) accelerated to 5.8 percent last year from 3.9 percent in 2021 due to soaring global oil prices arising from Russia’s invasion of Ukraine as well as elevated food prices brought about by supply shocks.
For this year, the BSP sees inflation accelerating further to six percent before easing to 2.9 percent next year.
The BSP monetary board has lifted interest rates by 4.25 percent since May last year, bringing the benchmark rate to a 16-year high of 6.25 percent from an all-time low of two percent.
The next-rate setting meeting of the central bank’s Monetary Board is scheduled on May 18.
