The Monetary Board yesterday decided to reduce the target reverse repurchase (RRP) rate of the Bangko Sentral ng Pilipinas (BSP) and hinted at further reductions in the next meetings.

RRP rate now stands at 6.25 percent. The interest rates on the overnight deposit and lending facilities were accordingly adjusted to 5.75 percent and 6.75 percent, respectively.

“With inflation on a target-consistent path, the current macroeconomic outlook supports a calibrated shift to a less restrictive monetary policy stance,” Eli Remolona Jr., BSP governor and Monetary Board chief, said.

He said inflation is projected to trend downward to within the government’s 2 to 4 percent target range despite the uptick in July.

“We see inflation trending downward, settling within the target range for 2024 to 2026,” BSP Deputy Governor Francis Dakila Jr. said.

Based on the latest readings, Dakila said the forecast for 2024 is now at 3.3 from 3.1, representing a slight upward adjustment because of the carry-over on the July inflation.

For 2025, the forecast is now at 2.9 percent from 3 percent, and 3.3 percent for 2026.

“The balance of risks continues to lean on the downside for 2024 and 2025 and slight upside for 2026,” Dakila said.

“This outlook is supported by well-anchored inflation expectations over the policy horizon,” Remolona added.

According to Remolona, the downside risks are linked mainly to lower import tariffs on rice, while upside risks could come from higher electricity rates and external factors.

“The Monetary Board also expects domestic demand prospects to hold firm. Despite tight financial conditions, second-quarter GDP growth has been solid and the unemployment rate has declined. Public investment alongside easing price pressures and robust employment conditions are expected to support economic activity,” Remolona said, noting that “monetary authorities remain mindful of lingering upside risks to prices.”

He said it is hoped that the easing stance will “make lending rates lower, make credit easier.”

“It’s one move. We may need further moves in the same direction. We’ll see,” Remolona said, adding that the tweaks to the policy stance will be “measured.”

“Something pretty bad has to happen (to warrant) for a 75-basis point cut,” Remolona said.

Gareth Leather, senior Asia economist of London-based Capital Economics, said “another 50 basis points of cuts before the end of the year” is expected.

“The tone of the central bank’s press conference suggests further easing is likely over the coming months. The weak GDP figures released last week suggest that the economy would certainly benefit from further easing. Growth slowed to just 0.5 percent in the second quarter, from 0.9 percent in the previous quarter, on the back of a contraction in private consumption and exports,” Leather said.

Although headline inflation rose from 3.7 percent in June to 4.4 percent last month, Leather said inflation is seen “to drop back to target in August on the back of beneficial base effects and remain low throughout the rest of the year.”

“If we are right, this should give the central bank the confidence it needs to loosen policy further over the coming months. The BSP said that inflation expectations were well anchored and that the risks to its 3.4 percent forecast for this year were to the downside,” he said.

“Overall, we are expecting a 25bps cut in the BSP’s two remaining meetings of the year in October and December. Our forecasts are more dovish than the consensus,” Leather said.

July’s inflation upturn brought the national average inflation to 3.7 percent, at the higher end of the government’s target range of between 2 and 4 percent.

Core inflation, which excludes selected food and energy items, slowed down to 2.9 percent from 3.1 percent in the previous month. In July 2023, core inflation was higher at 6.7 percent.

Remolona said this was consistent with the BSP’s latest assessment that inflation will temporarily settle above the target range in July 2024 due mainly to higher electricity rates and positive base effects but will likely follow a general downtrend beginning in August 2024.

Higher prices of food, transport and utilities pushed inflation higher to 4.4 percent in July from the previous month’s 3.7 percent, the Philippine Statistics Authority yesterday said.

This brings the national average inflation to 3.7 percent, at the higher end of the government’s target range of between 2 and 4 percent.

Claire Dennis Mapa, national statistician and civil registrar general, said the uptrend was primarily influenced by the higher year-on-year increase in the index of housing, water, electricity, gas and other fuels.

“The faster annual growth rate of the heavily-weighted food and non-alcoholic beverages index at 6.4 percent also contributed to the uptrend of the overall inflation. Higher inflation rates during the month were also noted in the indices of transport at 3.6 percent and education services at 5.8 percent,” Mapa said.

In contrast, the following commodity groups registered lower inflation rates during the month: alcoholic beverages and tobacco; clothing and footwear; health; recreation, sport and culture; and restaurants and accommodation services.

Core inflation, which excludes selected food and energy items, slowed down to 2.9 percent from 3.1 percent in the previous month. In July 2023, core inflation was higher at 6.7 percent.

Mapa said food inflation at the national level rose to 6.7 percent from 6.5 percent in June.

“The acceleration of food inflation was mainly brought about by the year-on-year increase in meat and other parts of slaughtered land animals index. The index of fruits and nuts also contributed to the uptrend.  However, slower annual decline was noted in the indices of fish and other seafood and oils and fats,” Mapa said.

Food inflation shared 54.3 percent or 2.4 percentage points to the overall inflation in July.

Inflation rate in the National Capital Region (NCR) also moved at a faster rate of 3.7 percent.  Areas outside NCR also showed an uptrend of 4.6 percent.

Thirteen regions  outside NCR exhibited higher inflation rates. Bangsamoro Autonomous Region in Muslim Mindanao registered the highest inflation rate of 5.7 percent while Region I (Ilocos Region) remained as the region with lowest inflation rate for the seventh consecutive month.

Only temporary

“The latest inflation outturn is consistent with the BSP’s (Bangko Sentral ng Pilipinas) latest assessment that inflation will temporarily settle above the target range in July 2024 due mainly to higher electricity rates and positive base effects but will likely follow a general downtrend beginning in August 2024,” said Eli Remolona Jr., BSP governor, adding that the July reading is within the BSP’s forecast range for the month of between 4 to 4.8 percent.

“The balance of risks to the inflation outlook has shifted to the downside for 2024 and 2025 due largely to the impact of the lower import tariff on rice under Executive Order (EO) 62 (Series of 2024). Nonetheless, higher prices of food items other than rice, as well as higher transport and electricity charges continue to pose upside risks to inflation,” Remolona said.

He said the Monetary Board will consider the latest inflation outturn as well as the second quarter 2024 national accounts in its assessment of the inflation outlook and the balance of risks in the August 2024 monetary policy meeting.

“The BSP will ensure that monetary policy settings remain in line with its primary mandate to safeguard price stability conducive to sustainable economic growth,” the BSP chief added.

Finance Secretary Ralph Recto, meanwhile, has assured the public  the inflation rate in July is likely a one-time uptick due to high base effects and is expected to temper and fall within target for the rest of the year as government interventions take full effect.

“Inflation rate is expected to stabilize and fall within target for the rest of the year as the impact of government interventions, particularly the reduced rice tariffs, will be more pronounced starting this August. Although, we might see slight increases in vegetable prices due to damages brought by Typhoon Carina in the agriculture sector,” Recto said.

Recto further assured the public  the decline in retail prices of rice will become more apparent in the coming months as the volume of rice imports at lower tariff is anticipated to increase and augment local supply.

Arsenio Balisacan, National Economic and Development Authority secretary, also assured the public  government is implementing crucial interventions to support the most vulnerable sectors and ensure food security amid the ongoing La Niña phenomenon and the higher inflation.

“The government is relentlessly working to address our nation’s most pressing concern of ensuring food security for every Filipino amid the faster rise in prices in July and the expected typhoons and rains due to the onset of La Niña this August,” Balisacan said.

He added  the weather phenomenon is expected to persist until the first quarter of 2025.

He said in preparation for La Niña, the Department of Agriculture (DA) has assured the availability of the quick response fund, assistance, credit and the seed buffer stock.

The agency has also expedited the declogging of farm drainage systems and constructing water-impounding projects and post-harvest facilities.

To assist farmers in dealing with higher fuel prices, DA will provide around P510 million in fuel subsidies to crop, livestock and poultry farmers. It is anticipated that around 160,000 farmers will benefit from over P3,000 in fuel assistance between August and September 2024.

“Between 2023 and 2021, about 2.5 million Filipinos were lifted out of poverty, bringing our country’s poverty incidence down to 15.5 percent from 18.1 percent. Our goal now is to sustain this momentum by addressing the constraints to food security and economic development more broadly,” Balisacan said.

Rate cut unlikely

“Faster inflation reduces rhetoric possibility of a 0.25 local policy rate cut, as signaled by local monetary officials lately. But local policy rate cuts remain possible in the coming months, especially if inflation would stay well within the 2 percent-4 percent inflation target,”said Michael Ricafort, chief economist for Treasury Group of Rizal Commercial Banking Corp.

Bank of the Philippine Islands  said the probability of a rate cut from the BSP in August has declined now that headline inflation is once again above its target.

“The BSP’s decision on August 15 will also depend on the upcoming GDP data, which could either prompt a delay in rate cuts if GDP exceeds expectations or justify an immediate rate cut if the data significantly misses the forecasts. The BSP will likely prioritize domestic data in its policy decision on August 15, but it may also consider global developments. Any signals from the Federal Reserve suggesting a substantial rate cut in September could increase the chances of a rate cut from the BSP in the next policy meeting,” BPI said.

“Nevertheless, we maintain our view that rate cuts are on the horizon given the favorable outlook for inflation. The recent drop in core inflation to 2.9 percent supports the argument for a potential rate cut in the coming months,” BPI added.

Miguel Chanco, chief Emerging Asia economist of Pantheon Macroeconomics,  said the July breach of the BSP’s target range likely means that an August rate cut is now off the table.

“We still think that 75bp-worth of cuts is doable by year-end, especially if we’re right about the Fed’s potentially much larger cuts in the fourth quarter, following an initial 25bp cut in September. Accordingly, our revised base case for the BSP is a 25bp cut in October, followed by a 50bp in December. To be sure, if we’re right about a likely huge miss in Thursday’s Q2 GDP report, then an August cut could come swiftly back into the discussion,” Chanco said.

As inflation outlook shifted to downside, the Monetary Board during its last meeting in June decided to maintain the key rates of the BSP and hinted a “somewhat more likely” rate cut when it next meets this month.

BSP’s Target Reverse Repurchase (RRP) Rate remains at 6.50 percent. The interest rates on the overnight deposit and lending facilities will also remain at 6 percent and 7 percent, respectively.

“(We’re) somewhat more dovish than before,” Remolona said after the meeting.  He hinted at a possible total cut of 50 basis points for this year – 25 basis points each for the third and fourth quarter.

June’s action was the sixth consecutive time that the Monetary Board decided to keep steady the key rates after the 0.25 off-cycle rate hike last Oct. 27, 2023.

As inflation outlook shifted to downside, the Monetary Board yesterday  maintained the key rates of the Bangko Sentral ng Pilipinas (BSP) and hinted a “somewhat more likely” rate cut by the next meeting in August.

BSP’s Target Reverse Repurchase (RRP) Rate remains at 6.50 percent. The interest rates on the overnight deposit and lending facilities will also remain at 6.0 percent and 7.0 percent, respectively.

Eli Remolona, BSP governor and Monetary Board chief, said they’re “on track (to) cut in the third quarter.”

“(We’re) somewhat more dovish than before,” Remolona said. He hinted at a possible total cut of 50 basis points for this year–25 basis points each for the third and fourth quarter.

Yesterday’s action was the sixth consecutive time that the Monetary Board decided to keep steady the key rates after the 0.25 off-cycle rate hike last October 27, 2023.

Remolona said they expect inflation “to go down this year and (maybe even) next year and go up by 2026 but  stay within the target range.”

“The balance of risks to the inflation outlook has shifted to the downside for 2024 and 2025 due  to the impact of lower import tariffs on rice under Executive Order 62. Nonetheless, higher prices of food items other than rice, transport charges, and electricity rates continue to pose upside risks to inflation,” Remolona said, stressing that inflation is moving closer to the midpoint of the 2 to 4 percent target range.

Iluminada Sicat, senior assistant governor, said the risk-adjusted inflation forecasts have eased to 3.1 percent for both 2024 and 2025 from 3.8 percent and from 3.7 percent, respectively.

This is near the middle of the government’s full-year target range of between 2 and 4 percent.

“The reduction in the inflation outlook considered the shift in the balance of risk which is now in the downside. Inflation expectation has also remained well-anchored,” Sicat said.

Prices of key consumer products continue to rise in May as inflation increased to 3.9 percent from 3.8 percent the previous month, data from the Philippine Statistics Authority showed.

May’s reading is the fastest in four months and brings the national average inflation from January to May to 3.5 percent.

Core inflation, which excludes selected food and energy items, slowed down to 3.1 percent in May from 3.2 percent in the previous month.

“There are still some uncertainties in other food items like pork, corn and fish. There’s uncertainty with electricity and transport charges. These are the main upside risks,” Remolona said.

Sicat added they are also expecting adjustments in toll rates and higher global crude oil prices.

Remolona said prospects for domestic output growth “remain in line with medium-term trends amid favorable labor market conditions and strong net exports.”

“On balance, the Monetary Board deems it appropriate to hold monetary policy settings steady at this time. The Monetary Board also anticipates price pressures to ease further in the second half of the year with the implementation of EO 62 as well as Administrative Order 20. If sustained, an improvement in the inflation outlook would allow more scope to consider a less restrictive monetary policy stance. However, uncertainty in the external environment calls for some caution against potential spillovers, including those in the financial markets,” Remolona said.

“The BSP will ensure that monetary policy settings remain in line with its primary mandate to safeguard price stability conducive to sustainable economic growth,” he added.

Aris Dacanay, economist for Asean of HSBC, said yesterday’s action “comes as no surprise.”

“The BSP’s tone was roughly the same during this meeting or perhaps slightly more dovish, not closing the possibility of it cutting ahead of the Fed. We even think the BSP was even more confident than last time, reflecting the fact that monetary policy in the Philippines may be becoming more independent from the Fed, even if partially. And we argued in our most recent central bank preview that this confidence isn’t whimsical whatsoever. We think August is still a bit too early to loosen the monetary reins. We do not think inflation will be soft enough by the August meeting with the rice tariff rate cut needing time to work its way in reducing prices. The current account deficit will also need to improve even further. And perhaps, the well-known ‘holiday-remittances’ will give the current account that boost it needs,” Dacanay said.

Miguel Chanco, chief Emerging Asia Economist of Pantheon Macroeconomics, said the statement “was very dovish, with the board now seeing that the balance of risks to inflation have shifted to the downside.”

Prices of key consumer products continue to rise in May as inflation increased to 3.9 percent from 3.8 percent the previous month, data from the Philippine Statistics Authority (PSA) showed.

May’s reading is the fastest in four months and brings the national average inflation from January to May to 3.5 percent.

Core inflation, which excludes selected food and energy items, slowed down to 3.1 percent in May from 3.2 percent in the previous month.

Claire Dennis Mapa, national statistician and civil registrar general, said the uptrend in the overall inflation “was primarily influenced by the higher year-on-year increase in the index of the housing, water, electricity, gas and other fuels.”

“The faster annual growth of the transport index also contributed to the uptrend of the overall inflation. In contrast, food and non-alcoholic beverages and alcoholic beverages and tobacco indexes registered lower inflation rates during the month,” Mapa said.

Eli Remolona, Bangko Sentral ng Pilipinas (BSP) governor, said the May inflation of 3.9 percent is within the BSP’s forecast range of 3.7 to 4.5 percent.

“The inflation outturn is consistent with the BSP expectations that inflation could temporarily accelerate above the target range over the near term due to adverse weather conditions on domestic agricultural output and positive base effects,” Remolona said.

He, however, stressed  the “BSP expects average inflation to return to the target range for full year 2024 and 2025.”

“The risks to the inflation outlook continue to lean toward the upside. Possible further price pressures are linked mainly to higher transport charges, elevated food prices, higher electricity rates, and increase in global oil prices,” Remolona said.

“Looking ahead, the Monetary Board will consider the latest inflation outturn in its upcoming monetary policy meeting on June 27. The BSP also continues to support the National Government’s non-monetary measures to address supply-side pressures on prices and sustain the disinflation process,” the BSP chief said.

Top contributors

Mapa said the indexes of clothing and footwear; health; recreation, sport and culture; restaurants and accommodation services; and personal care, and miscellaneous goods and services also registered lower increases, adding that the top three commodity groups contributing to the May  overall inflation were food and non-alcoholic beverages; restaurants and accommodation services and transport.

“Food inflation at the national level slowed down to 6.1 percent in May 2024 from 6.3 percent in April. In May 2023, food inflation was higher at 7.5 percent,” Mapa said.

He said the deceleration of food inflation in May was mainly brought about by the slower year-on-year increase in vegetables, tubers, plantains, cooking bananas and pulses index.

This was followed by rice with a slower annual increase of 23 percent during the month from 23.9 percent in April. Fish and other seafood also contributed to the downtrend with zero percent inflation rate in May.

However, higher annual growth rates during the month were observed in the indices of meat and other parts of slaughtered land animals at 1.6 percent in May from 1 percent in the previous month.

“Food inflation shared 55 percent or 2.1 percentage points to the overall inflation in May 2024. The top three food groups in terms of contribution to the food inflation during the month were cereals and cereal products; meat and other parts of slaughtered land animals; ready-made food and other food products,” Mapa said.

Efforts stepped up

National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan said the national government is “continuously stepping up efforts against persistent inflation drivers.”

“The government will continue to implement lasting policy reforms to ensure we address the drivers of food and non-food inflation sustainably. We want to maintain a macroeconomic environment conducive to investment and high-quality job creation – an environment that would allow us to hit the Marcos Administration’s development targets by 2028,” Balisacan said.

“To help manage food inflation, promote policy stability and investment planning, and enhance food security, the NEDA Board has agreed to reduce the rice duty rate to 15 percent from 35 percent for both in-quota and out-quota imports until 2028,” he added.

Balisacan said the NEDA Board also approved the extension until 2028 of the reduced tariff rates on corn, pork and mechanically deboned meat under Executive Order No. 50, s. 2023.

“The NEDA Board approved the new Comprehensive Tariff Program for 2024-2028, a strategic move to ensure access and affordability to essential commodities while balancing the interests of consumers, local producers, and the economy. At the same time, we recognize the need to help our farmers by modernizing our agricultural sector,” he said.

Balisacan further emphasized that one of the Marcos administration’s priorities is to raise productivity so that the country can sustainably reduce food prices and shield consumers and the economy from the price volatility of food commodities in the global market.

“On the part of the Executive, we will continue to find supply-side solutions to help manage the price increases of other commodities and keep inflation within the target range in the months to come,” he said.

Also, to mitigate the impact of elevated food prices on the poor and vulnerable sector, the Department of Social Welfare and Development and relevant agencies are set to implement the Food Stamp Program nationwide in July.

This program expects to cover one million households by 2027 from the initial 300,000 families in 10 regions.

In the regions

Inflation in the National Capital Region (NCR) accelerated to 3.1 percent in May from 2.8 percent in the previous month. The main driver to the increase of inflation rate in the area was the higher annual increment in the heavily-weighted food and non-alcoholic beverages and the faster annual growth rate of housing, water, electricity, gas and other fuels index.

Inflation in areas outside NCR was observed at 4.1 percent in May, the same annual rate recorded in April. Higher annual increases were observed in the indices of housing, water, electricity, gas and other fuels; transport; and information and communication.

PSA said five regions in areas outside NCR exhibited higher inflation rates in May, with Bangsamoro Autonomous Region in Muslim Mindanao remaining as the region with the highest inflation rate for the fourth consecutive month at 5.9 percent, while Region I (Ilocos Region) still registered the lowest inflation for the fifth consecutive month at 2.3 percent.

As the risks to the inflation outlook continue to lean upward, the policymaking Monetary Board yesterday decided to keep the key rates of the Bangko Sentral ng Pilipinas (BSP) steady.

BSP’s Target Reverse Repurchase (RRP) Rate remains at 6.50 percent. The interest rates on the overnight deposit and lending facilities also remain at 6 percent and 7 percent, respectively.

Eli Remolona, BSP governor and Monetary Board chief, said “potential price pressures are linked mainly to higher transport charges, food prices, electricity rates, and global oil prices.”

“We are actually somewhat less hawkish than before, which means we could ease by Q3 or Q4 of this year. Possibly by August of this year,” Remolona said.

“There was a good (inflation) number in April, 3.8 percent is better than it looks because that included some positive base effects. There were other factors that were good news in terms of inflation,” Remolona said.

Faster price increases of food and non-alcoholic beverages, mainly due to El Niño and global disruptions, pushed inflation in April to its fastest in four months at 3.8 percent.

March inflation was at 3.7 percent. This brings the national average inflation from January to April to 3.4 percent, above the mid-range of the full-year target of between 2 and 4 percent.

Core inflation, which excludes selected food and energy items, slowed down to 3.2 percent in April from 3.4 percent in the previous month.

“The BSP’s latest forecasts indicate that inflation would settle close to the upper end of the target range,” Remolona said. He, however, stressed that inflation expectations “remain well-anchored.”

The inflation forecast for 2024 eased to 3.8 percent from 4.0 percent in the previous meeting. The inflation forecast for 2025, meanwhile, rose to 3.7 percent from 3.5 percent previously.

“The Monetary Board deems it appropriate to ensure sufficiently tight monetary policy settings until inflation settles firmly within the target range. A restrictive policy stance will also help keep inflation expectations anchored amid a possible buildup in upside risks to future inflation,” Remolona said.

Remolona also reiterated “the Monetary Board’s support for the national government’s non-monetary measures to address persistent supply-side pressures on food prices and to prevent further second-round effects.”

“Based on the latest GDP data, the expected path for domestic output growth over the medium term remains largely intact, even as recent indicators point to continued moderation under tight financial conditions. Moving forward, the BSP remains ready to adjust its monetary policy settings as necessary, in keeping with its primary mandate to safeguard price stability,” Remolona said.

Yesterday’s action was the fifth consecutive time that the Monetary Board decided to keep steady the key rates after the 0.25 off-cycle rate hike last Oct. 27, 2023.

Michael Ricafort, chief economist for the Treasury Group of Rizal Commercial Banking Corp., said “further local policy rate pause or cut (especially in 2024) could already be possible for the coming months.”

“(This comes) as fundamentally supported by the easing inflation trend as seen recently amid higher base effects; also as a function of future Fed rate pause or cut; also as a function of the behavior of the peso exchange rate, going forward,” Ricafort said.

“The latest pause in local policy rates came after the US central bank kept its key interest rates unchanged for the 6th consecutive meeting, at the 23-year high of 5.25 percent-5.5 percent target range on May 1, 2024. Any future possible Fed rate cut/s especially in the latter part of 2024, could be matched locally to maintain healthy interest rate differentials that also help stabilize the peso exchange rate, imports costs/prices, and overall inflation,” Ricafort said.

“Provided no escalation of geopolitical risks and the potential effects on world oil prices, also provided no large storm/El Niño drought damage that tends to increase food prices, headline inflation could still be well within the 2 percent-4 percent BSP inflation target in 2024,” Ricafort said.

“No surprises here,” said Aris Dacanay, HSBC economist for Asean.

“Despite the market’s repricing of the Fed rate cuts, the BSP didn’t need to follow the Bank of Indonesia who hiked its policy rate to help support the Rupiah. Not only does the BSP have an abundance of reserves, but it also has a good track record of defending the Peso and mitigating any volatility in the currency. Headline inflation in April also surprised to the downside and there was no urgent need for the BSP to hike its policy rate,” Dacanay said.

“We continue to expect the BSP to only cut after the Fed. Our baseline scenario is for the Fed to begin its easing cycle in 4Q 2024, starting with a 25bp rate cut. In this regard, we also expect the BSP to do its first 25bp policy rate cut in 4Q 2024 to 6.25 percent by year-end. This is roughly in line with Governor Remolona’s statement that the BSP will likely cut in the 2nd half of the year,” Dacanay added.

“All in all, macroeconomic conditions are becoming more and more balanced and the central bank’s ‘monetary policy freedom’ from the Fed is increasing. Although we don’t think the level of improvement is large enough for the BSP to cut ahead of the Fed, it may be enough for the BSP to keep its monetary stance steady if another episode of Fed repricing occurs,” Dacanay also said.

Faster price increases of food and non-alcoholic beverages, mainly due to El Niño and global disruptions, pushed inflation in April to its fastest in four months at 3.8 percent.

March inflation was at 3.7 percent. This brings the national average inflation from January to April to 3.4 percent, above the mid-range of the full-year target of between 2 and 4 percent.

Core inflation, which excludes selected food and energy items, slowed down to 3.2 percent in April from 3.4 percent in the previous month.

Claire Dennis Mapa, national statistician and civil registrar general, said the uptrend in the overall inflation in April was “primarily influenced by the higher year-on-year increase in the heavily-weighted food and non-alcoholic beverages at 6.0 percent during the month from 5.6 percent in March.”

“The faster annual growth rate of the transport index at 2.6 percent in April from 2.1 percent in the previous month also contributed to the uptrend of the overall inflation,” Mapa said.

Higher inflation rate was also noted in information and communication at 0.5 percent during the month from 0.4 percent in March, he added.

In contrast, Mapa said the following commodity groups registered lower inflation rates during the month: alcoholic beverages and tobacco; housing, water, electricity, gas and other fuels; furnishings, household equipment and routine household maintenance; health; recreation, sport and culture; restaurants and accommodation services; and personal care, and miscellaneous goods and services.

Mapa said food inflation at the national level rose to 6.3 percent in April from 5.7 percent in March.

“The acceleration of food inflation in April was mainly brought about by the year-on-year increase in the vegetables, tubers, plantains, cooking bananas and pulses index at 4.3 percent from 2.5 percent annual decline in the previous month. This was followed by fish and other seafood with an inflation rate of 0.4 percent during the month from an annual drop of 0.9 percent in March,” Mapa said.

Food inflation shared 57.9 percent or 2.2 percentage points to the overall inflation in April.

Inflation in the National Capital Region (NCR) decelerated to 2.8 percent from 3.3 percent.

Data showed the main driver to the slowdown of inflation rate in the area was the lower annual increment in housing, water, electricity, gas and other fuels.

Also contributing to the deceleration of inflation in the area was the slower inflation rate reported in the heavily-weighted food and non-alcoholic beverages.

Following the trend at the national level, overall inflation in areas outside NCR (AONCR) also showed an uptrend at 4.1 percent from 3.8 percent.  The acceleration of inflation in the area was mainly contributed by the higher annual increase in the heavily-weighted food and non-alcoholic beverages. Also contributing to the uptrend of inflation in the area was the faster annual increment in the transport index.

Mapa said 13 regions in AONCR exhibited higher inflation rates, with the Bangsamoro Autonomous Region in Muslim Mindanao posting the highest inflation rate for the third consecutive month at 6.3 percent, while Region I (Ilocos Region) still registered the lowest inflation for the fourth consecutive month at 2.4 percent.

Within forecast

The Bangko Sentral ng Pilipinas (BSP), however, said the April inflation of 3.8 percent is “within the forecast range of 3.5 to 4.3 percent.”

“The inflation outturn is consistent with the BSP expectations that inflation could accelerate temporarily above the target range in the next two quarters of the year due to the possible negative impact of adverse weather conditions on domestic agricultural output and positive base effects,” Eli Remolona, BSP governor, said.

“Nonetheless, the BSP expects average inflation to return to the target range for full year 2024 and 2025,” he said.

Remolona said the risks to the inflation outlook continue to lean toward the upside.

“Possible further price pressures are linked mainly to higher transport charges, elevated food prices, higher electricity rates, and global oil prices. Potential minimum wage adjustments could also give rise to second-round effects,” Remolona said.

The Monetary Board will consider the latest inflation and the first quarter gross domestic product outturn, among other information, in its upcoming monetary policy meeting on May 16, added Remolona.

“The BSP also continues to support the National Government’s non-monetary measures to address supply-side pressures on prices and sustain the disinflation process,” Remolona said.

On Monday, Remolona said the BSP has leeway to keep policy settings unchanged this month even if the April inflation reading comes in at 4 percent.

“The central bank remains hawkish, but a trend of 3 percent inflation in the coming months would give the central bank room to cut rates,” Remolona said.

“We are still hawkish because inflation is still high,” Remolona said, adding the base case for policy was a 25-basis-point rate cut in the fourth quarter or first quarter in 2025.

The BSP’s Target Reverse Repurchase (RRP) Rate remains at 6.50 percent. The interest rates on the overnight deposit and lending facilities also remain at 6.0 percent and 7.0 percent, respectively.

During last month’s meeting, Remolona said the risk-adjusted inflation forecast for 2024 has risen to 4.0 percent from 3.9 percent in the previous meeting. For 2025, the risk-adjusted inflation forecast is unchanged at 3.5 percent.

Top priority

As El Niño and global disruptions exert upward pressure on food prices, the National Economic and Development Authority (NEDA) said “the government has taken decisive action and prioritized measures to mitigate the effects of these extreme weather challenges.”

Arsenio Balisacan, NEDA secretary, said while April’s increase remains within the government’s target range, “it underscores the need for vigilance.”

“We are taking comprehensive measures to ensure food security amid geopolitical concerns and weather patterns worsened by climate change. The government’s major strategies aim to increase productivity, build the resilience of the agriculture sector, and improve the efficiency of food systems,” Balisacan said.

This thrust aligns with the Philippine Development Plan 2023-2028, emphasizing strategies and reforms to modernize the country’s agricultural and agribusiness sector.

“Meanwhile, we must augment local production during shortages to ensure an adequate food supply at affordable prices for all Filipinos. Food insecurity extends beyond economic strain–it directly impacts the well-being of all Filipinos. Failing to augment local production during shortages perpetuates poverty and exacerbates vulnerability,” said Balisacan.

“We prioritize food security, economic growth, and the welfare of our producers and consumers,” he said.

“Our actions aim to boost local production and prepare for any challenges in food supply and price upticks,” he added.

The Bangko Sentral ng Pilipinas sees inflation for the month of April to settle within the 3.5 to 4.3 percent range.

In a statement, BSP said continued price increases for rice and meat along with higher gasoline prices and the peso depreciation are the primary sources of upward price pressures for the month.

Lower prices of fish, fruits, vegetables as well as lower electricity rates and the rollback in LPG prices, meanwhile, could offset the upside price pressures, BSP said.

“Going forward, the BSP will continue to monitor developments affecting the outlook for inflation and growth in line with its data-dependent approach to monetary policy decision-making,” BSP said.

Inflation for March was recorded at 3.7 percent, within the government’s full-year target range of between 2 and 4 percent.

Feeling a bit more hawkish than before, the Monetary Board early this month decided to retain the central bank’s key rates for the fourth consecutive time as the country’s inflation path, while it may have shifted slightly higher, remains within the government’s target range.

The Reverse Repurchase (RRP) Rate remains at 6.50 percent.  The interest rates on the overnight deposit and lending facilities also remain at 6.0 percent and 7.0 percent, respectively.

Eli Remolona, BSP Governor, said the risk-adjusted inflation forecast for 2024 has risen to 4.0 percent from 3.9 percent in the previous meeting.  For 2025, the risk-adjusted inflation forecast is unchanged at 3.5 percent.

“The risks to the inflation outlook continue to lean toward the upside. Possible further price pressures are linked mainly to higher transport charges, elevated food prices, higher electricity rates, and global oil prices. Potential minimum wage adjustments could also give rise to second-round effects,” Remolona said.

“My sense is that the upside risks may have become worse so that would make us somewhat more hawkish than before.  So if I would say if we were relatively dovish we might reduce rates in the third quarter and that would be no more than 25 basis points but now we’re feeling a bit more hawkish than before so I would say we’re not gonna by the third quarter.  We may do it down the road. We’re contemplating easing, we’re not contemplating any further tightening,” Remolona added.

“I think the data will have to be really bad for us to consider a further rate hike because we’re already tight at the moment, this tightness we think, is sufficient to bring inflation rates down,” Remolona stressed.

Remolona said the Monetary Board noted that while upside risks to inflation have raised inflation expectations, these expectations have remained broadly anchored.

Remolona added the latest demand indicators suggest that domestic growth prospects remain largely intact over the medium term, even as overall activity continues to gradually respond to tighter financial conditions.

“Given these considerations, the Monetary Board deems it appropriate to maintain the BSP’s tight monetary policy settings. The BSP also continues to support the national government’s policies and programs to address supply-side pressures on the prices of key food commodities.  The BSP remains ready to adjust its monetary policy settings as necessary, in keeping with its primary mandate to safeguard price stability,” Remolona said.