NextGen Day

Governor of the Bangko Sentral ng Pilipinas (BSP), Felipe Medalla, informed international investors on Monday that the Philippines’ inflation rate is expected to return to goal in the second half of 2023.

Medalla informed business executives during the Philippine economic briefing held in Frankfurt, Germany, which was broadcast live on the Facebook pages of various government agencies, that the country’s inflation rate is now driven by supply-side factors after first being affected by global challenges.

He claimed that the administration has been making every effort to find a solution, which includes accelerating the importation of a number of agricultural goods like rice, sugar, and beef.

According to Medalla, there are already indications that inflation is normalizing, with the rate of change from month to a month already slowing.

Because of our highly strong monetary policy, he added, “we do not see the shocks propagating into a self-fulfilling prophesy unless there is a huge shock again that’s related to the weather.”

After the rate of price increases began to exceed the government’s 2-4 percent inflation goal zone in April of last year, the BSP’s Monetary Board (MB), which sets policy, increased the key policy rate of the central bank by a total of 350 basis points.

Inflation in December of last year reached 8.1 percent, the highest level since November 2008, which Medalla had previously suggested would be the peak.

We anticipate being below four percent by the end of the third quarter or the beginning of the fourth, he said.

By the beginning of 2024, the inflation rate may even fall below 2 percent, according to Medalla’s inflation models.

He had claimed that the Philippines’ longest stretch of time with inflation of roughly 4% and three to four shocks occurring in less than four months was 15 months.

The present run is the longest so far and unexpected due to a number of causes that began out as global difficulties and then changed into domestic supply-side factors, according to him. Base effects are often seen to subside after around 16 months.

“We are well along the target-consistent inflation path…

Although we are not there yet, Medalla promised that they would be.

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