DESPITE the steady rise of consumer prices in the country in recent months, the International Monetary Fund (IMF) believes inflation will likely stabilize and stay relatively low in the long term.
In the IMF’s most recent World Economic Outlook (WEO), the global financial authority forecast the Philippines’s inflation numbers to hit 3 percent in 2023.
This forecast is a normalization from the current inflation numbers—which the Philippine Statistics Authority (PSA) recently reported was at 6.7 percent in September alone.
It is also lower than the IMF’s 4.9-percent average forecast for 2018 and 4 percent for 2019.
Also notably, the Philippines’s inflation will be below the median 3.3-percent forecast inflation among emerging and developing Asia five years from now.
The IMF also noted the Bangko Sentral ng Pilipinas’s (BSP) move to raise policy rates in recent months as headline inflation has risen and the local currency has come under pressure.
The move, it pointed out, was synchronous with that of the central banks of India, Indonesia and Mexico.
Just a few days ago, the BSP, in a move widely anticipated by markets, decided to hike its main policy rates for the fourth consecutive meeting this year in an effort to pull down the stubbornly high prices in the country.
The Monetary Board decided to raise the interest rate on the BSP’s overnight reverse repurchase (RRP) facility by 50 basis points to 4.5 percent effective Friday, September 28.
The interest rates on the overnight lending and deposit facilities were also raised accordingly.
Inflation forecasts were also revised upward to reflect the higher than anticipated print in August.
In particular, the BSP said inflation is now expected to average 5.2 percent, from the 4.9-percent projection in the previous meeting on August 9.
For 2019 inflation is now also expected to breach target to hit 4.3 percent, from the earlier forecast of 3.7 percent.
But the BSP, after the 6.7-percent inflation rate in September was announced last Friday (October 5), said inflation may have actually peaked during that month and is expected to decelerate in 2019 and 2020 in the absence of further shocks.
“Nevertheless, the BSP remains vigilant in assessing evolving inflationary conditions in order to ensure that the monetary-policy stance remains consistent with its price stability mandate,” the BSP said.
“At the same time, the BSP continues to support the various nonmonetary interventions of the national government that will further mitigate the impact of supply-side factors on consumer prices,” it added.