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- Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla expects inflation to be below 4% by the second half of 2023 and below 2% by early 2024 due to decreasing month-on-month inflation.
- The Monetary Board has raised rates by a total of 350 basis points in 2022 to slow down inflation and support the Philippine Peso, bringing the policy rate to a 14-year high of 5.5%.
- Medalla also announced that more rate hikes will be implemented at BSP’s first two policy meetings this year to bring inflation to the 2% to 4% target range.
After closing 2022 with an 8.1% inflation rate, Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla has emphasized that the country’s inflation is expected to be below 4% by the second half of the year and below 2% by early 2024 because month-on-month inflation is going down. Medalla said this during the Philippine economic briefing in Frankfurt, Germany.
“Now, we expect that by the end of the third quarter or by the fourth quarter, we are already below 4%. Our models predict that because of high base effects, or as the past event was so high, we will actually be below 2% early 2024,” the Governor explained.
It can be recalled that the Monetary Board, the agency responsible for making policy decisions related to the management, operation, and administration of the Central Bank, has raised the rates by a total of 350 basis points in 2022 to slow down inflation and support the Philippine Peso, bringing the policy rate to a 14-year high of 5.5%.
Medalla also earlier announced that more rate hikes at the BSP’s first two policy meetings this year to bring inflation to the 2% to 4% target range will be implemented.
“We expect to be very successful in bringing down inflation. Month-on-month inflation is normalizing. Because of our very aggressive monetary policy, we do not see shocks propagating self-fulfilling inflation,” Medalla added.
2022 was not a good year for the country’s economy. In a year-end report by the Philippine Statistics Authority, the inflation rate in December rose to 8.1%, the highest since 2008. The average inflation rate for 2022 was even at 5.8%, almost 50% higher than 2021’s 3.9% inflation rate.
Meanwhile, the BSP Chief highlighted that one of the factors that the monetary agency has considered in calibrating its policy is the pace of tightening of the U.S. Federal Reserve. It can be remembered that the move of the Federal Reserve pulled the Philippine Peso in the second quarter of 2022, where the recorded all-year-low was on September 27, 2022, with $1.000 = ₱59.262.
Earlier this month, Medalla expressed his optimistic vision for the Philippine Peso as it is showing signs of regaining its strength over the USD.
“It seems the strong dollar period is over. Second, we’re beginning to see oil prices to drop.
Weak peso further aggravating the inflation is no longer a big problem,” he claimed.
With this, the Central Bank Governor even stressed that the continued recovery of the Philippine Peso has given the Monetary Board time to finally focus on inflation-targetting rather than foreign exchange rate management.
“In other words, by 2024, we will be more or less near the midpoint of our target,” Medalla concluded.
The first policy meeting of the Monetary Board for 2023 is set for February 16. The Monetary Board of the BSP is headed by Medalla and composed of Finance Secretary and former BSP Chief Benjamin Diokno, Peter Favila, Antonio Abacan, Jr., V. Bruce Tolentino, Anita Linda Aquino, and Eli Remolona.
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Featured Photo from Filipino News
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