DBS economist for ASEAN Chua Han Teng said the country’s central bank has recognised that headline inflation is on a decelerating path due to slower increases in food and energy-related items.
The central bank’s (BSP) monetary board is convinced that inflation is set to return to its 2-4 per cent target band in the fourth quarter this year, he said.
Inflation averaged at 7.9 per cent in the first four months of the year, still way above the BSP’s target, despite easing to an eight-month low of 6.6 per cent in April from 7.6 per cent in March.
BSP slashed its inflation forecast for this year to 5.5 per cent this month from 6 per cent earlier and to 2.8 per cent for next year from 2.9 per cent earlier.
The monetary board also kept its overnight reverse repurchase rate unchanged at 6.25 per cent, pausing its year-long aggressive hiking cycle after raising the rate by a total of 425 basis points since May last year to combat elevated inflation, a Philippine newspaper reported.
“While the BSP has communicated in its statement that it would keep its policy rate unchanged ‘over the near term, it has left the door open to resume further monetary tightening, should actual inflation deviate higher from its current assessment,” Teng was quoted as saying.
BSP is likely to keep key interest rates steady in the remaining five rate-setting meetings for 2023, DBS believes.
Fibre2Fashion News Desk (DS)