BSP chief sees inflation returning to target by September or October
MANILA, Philippines — Inflation is expected to land within the Bangko Sentral ng Pilipinas' target by September or October, barring shocks that will hamper the domestic economy.
That was the projection of BSP Governor Felipe Medalla on Monday.
As it is, consumer price growth decelerated to 6.6% in April. This was slower compared to the 7.6% recorded in March, as consumer price growth decelerated for the third straight month.“Within target year-on-year by September, October. And next year is almost slightly lower than midpoint of our target,” Medalla told reporters.
The BSP governor added that by October or December, inflation would land below 4%, adding that the drop will be “fast” considering the sheen of base effects.
The central bank has a target of 2-4% inflation annually. That has not been the case in 2022, as Filipinos endured painful price growth as expensive fuel prices, a weak peso, and the reopening of the domestic economy fueling household spending.
“We think we’ve run out of shocks. The monetary policy that we have will bring us back to normal,” Medalla added.
The BSP kept interest rates at 6.25% following its rate-setting meeting earlier in May. The BSP has injected 425 basis points into its key rate, which banks and financial institutions use as a benchmark for handing out loans.
Central banks, like the BSP, use rate hikes to rein in demand pressures that are stoking price growth.
The higher interest rates work by prompting consumers and businesses to think twice about borrowing money. This, in turn, lessens the money that’s circulating in the economy and chasing a limited supply of consumer items.
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