BSP: Inflation surpassed target in March
Inflation likely continued its uptick in March but breaching the target of the central bank for the first time in three months amid more expensive electricity costs, oil and food prices.
Based on its monthly forecast, the Bangko Sentral ng Pilipinas (BSP) said the headline rate could settle within the range of 3.4 and 4.2 percent.
The lower end of the forecast is the same rate as the February print of 3.4 percent.
If realized, the headline rate could be flat but with greater likelihood of a significant increase and even surpass the four percent target of the BSP.
It was in November 2023 when inflation last breached the target at 4.1 percent.
According to the BSP, sources of upward price pressures include the continued increases in the cost of key food items particularly rice and meat.
For one, rice inflation has been on a continued uptrend, quickening further to 23.7 percent in February with all three classifications of the staple tracked by the government posting increases as world market prices pick up.
The Department of Agriculture already said rice inflation could remain elevated until August due to base effects.
The BSP noted that the inflation uptick in March could also stem from increased domestic oil prices and electricity rates.
Last month, the Manila Electric Co. announced that power rates will be higher by P0.0229 per kilowatt-hour to P11.9397 per kWh. This marked the third straight increase for the year.
This is due to higher transmission charge for residential customers amid increased ancillary service charges.
A total of P2.30 per liter increase has been recorded for gasoline and P0.65 per liter hike for both diesel and kerosene in March.
Since the start of 2024, gasoline prices have been adjusted upward by as much as P7.75 per liter, while diesel and kerosene have been more expensive by P5.10 and P1.05 per liter, respectively.
Further hikes are already expected, at least for the first semester, amid continued conflict in the Middle East and diversions of oil supply from the Red Sea to longer haul around South Africa.
On the other hand, the BSP said lower prices of vegetables, fruits and fish, as well as the appreciation of the peso, are the primary sources of downward price pressures during the month.
Going forward, the BSP said it would continue to monitor developments affecting the outlook for inflation and growth in line with its data-dependent approach to monetary policy decision-making.
The Philippine Statistics Authority is set to announce the latest headline inflation on April 5.
The BSP will then hold its monetary policy meeting on April 8, where it is widely expected to keep rates unchanged as inflation remains a concern.
In its February rate-setting meeting, the BSP lowered its inflation forecast for this year to 4.2 percent from 3.9 percent previously.
To tame inflation and stabilize the peso, the central bank’s Monetary Board raised interest rates by 450 basis points between May 2022 and October 2023.