PH Wins Battle vs. Inflation
October 07, 2024
The Philippines recently experienced a four-year low price growth last month after its long and painful fight against inflation. This created a perfect economic condition for gradual interest rate cuts.
According to Aris Dacanay, an economist at HSBC Global Research, “Last time inflation was this low, the Philippines was in lockdown due to the COVID-19 pandemic.” According to him, the inflation last September was lower-than-expected. “It almost feels too good to be true,” Dacanay added. “But we think the September CPI (Consumer Price Index) marks the day that the BSP’s inflation battle is finally over – all because of a mix of both hard work and luck.”
According to data, inflation decreased to a 1.9% in September, lower than the expected market rate and Bangko Sentral ng Pilipinas’ (BSP) own forecast rate of 2 to 2.8% for this month.
In a commentary, the Bank of the Philippine Islands (BPI) said that this might be the lowest point that inflation reached this year. According to them, A potential rebound [is] expected in the final three months of 2024 as favorable base effects fade. Nevertheless, we expect inflation to remain under control, potentially staying below 3 percent in the absence of supply shocks.”
Over the years, inflation rate has averaged to 3.4%, sitting comfortably within the 2 to 4% target range of the BSP. To this date, the BSP has to undo its most forceful tightening actions in the last two decades, which led the benchmark rate to its highest level in 17 years in order to tame a high inflation mark.
Moving forward, Governor Eli Remolona Jr. Said that the central bank would initiate “baby steps” to achieve a 4.5% key rate fall by the end of 2025. This suggests that monetary authorities in the country are far from resorting to jumbo cuts that may lead to market fears that may cause the economy a lot. BPI shared the same sentiments. According to them, “While we expect more monetary easing, it is unlikely that the BSP will adopt an aggressive approach.”
SOURCE: https://business.inquirer.net/483770/ph-wins-battle-vs-inflation