FILIPINOS may have experienced faster inflation in March, a rate closer to the higher end of the inflation target set by the monetary authorities, according to the Bangko Sentral ng Pilipinas (BSP).
On the sidelines of the launch of the Digital Financial Inclusion Awards on Wednesday, BSP Governor Eli M. Remolona Jr. said inflation in March may have been around 3.9 percent.
The BSP’s inflation target is 2 to 4 percent for 2024. Inflation in February increased to 3.4 percent from 2.8 percent in January. Inflation was at 7.6 percent in March 2023.
“It will be close to 4 [percent]. It could be 3.9 [percent], you know. But we’ll see,” Remolona said, partly in Filipino.
If the March inflation rate reaches 3.9 percent, this will mark the fourth month that the inflation rate was within the BSP’s 2 to 4 percent target.
Inflation first fell within BSP’s target in December 2023 at 3.9 percent, followed by January 2024 at 2.8 percent, and February 2024 at 3.4 percent.
“Yeah [we expect inflation to accelerate in March] because of positive base effects,” Remolona said.
This will be used to inform any decision that the Monetary Board will make in its next policy meeting slated for April 4. However, March inflation will be released by the Philippine Statistics Authority (PSA) on April 5.
Other factors include the decision of the United States Federal Reserve. However, Remolona stressed that the Monetary Board is keeping in lock-step with the Fed.
The BSP Governor merely said the decisions of the Fed provide the Monetary Board additional data to consider.
“We don’t have to wait for them. We don’t have to wait for them. We watch them very closely. And we read the statements. We read what the different members of the FOMC says, that’s data for us. It will affect our exchange rate,” Remolona said.
“But I think we don’t have to put a lot of weight on what they do. Unless the market goes crazy. Unless they overreact. And the peso somehow weakens sharply. Then we’ll have to react more decisively. But we don’t expect that. We don’t expect that,” he added.
Meanwhile, Remolona said the BSP is bent on cutting the Reserve Requirement Ratio (RRR) not only as a monetary policy measure but financial intermediation efficiency.
Cutting the RRR, Remolona said, may not come in a policy meeting of the Monetary Board but may come in a regular MB meeting.
He said it may be difficult to cut the RRR during a policy rate meeting as it could cause market confusion.
“I think the markets are very smart. But even when they’re very smart, this can be a bit confusing,” Remolona said.
“We are already improving our models. So, I think the same data as before, roughly the same data as before. I think we will act with more confidence than before,” he responded to questions on whether the Monetary Board will cut, maintain, or raise rates in April.
In December 2023, amid upside risks to the inflation outlook, the Monetary Board of the BSP decided to maintain key policy rates during its last meeting for the year.
In a briefing, Remolona said the Monetary Board decided to keep the BSP’s Target Reverse Repurchase (RRP) Rate unchanged at 6.5 percent.
With this, the interest rates on the overnight deposit and lending facilities will remain at 6 percent and 7 percent, respectively.
With the latest decision of the Monetary Board, the country’s key policy rates increased by a total of 100 basis points this year.