THE Bangko Sentral ng Pilipinas (BSP) risks losing its grip on inflation expectations if it delays policy tightening, a former official said.
“The evidence is no longer ambiguous — inflationary pressures are broadening, deepening and becoming more persistent,” GlobalSource Partners and former BSP deputy governor Diwa Guinigundo said in a commentary on Wednesday.
Guinigundo said the case for tightening had become increasingly compelling, with inflation no longer driven solely by external supply shocks but now spreading across the broader economy.
“What began as supply shocks from geopolitical tensions in the Middle East is now transmitting firmly into the demand side,” he said, pointing to rising fuel prices that have cascaded into higher transport, freight and logistics costs, with second-round effects increasingly evident across goods and services.
These developments, he said, are being compounded by looming utility rate adjustments and the restoration of rice tariffs, which could further push up consumer prices given rice’s heavy weight in the inflation basket.
The shift from isolated supply disruptions to more generalized price pressures has heightened concerns that inflation could become entrenched if not addressed promptly.
Consumer price growth accelerated to 4.1 percent last month, and BSP Deputy Governor Zeno Abenoja previously said it could hit 5.0 percent this month.
The BSP’s policymaking Monetary Board has raised its inflation projections for this year and the next to 5.1 percent and 3.8 percent, respectively, from 3.6 percent and 3.2 percent.
Guinigundo warned that once inflation expectations become unanchored, monetary policy would become less effective and more costly to implement.
“While initial shocks were supply-driven, the window to preempt second-round effects has narrowed,” he said.
“Delay now risks embedding inflation further into wages, contracts and expectations.”
The central bank maintained an easing bias in February and kept rates steady at 4.25 percent during an off-cycle meeting last month. Most analysts are pricing a quarter-point rate hike today.
Guinigundo said the measured approach may have been appropriate when inflation shocks were largely supply-driven. However, he said that the window to preempt second-round effects had narrowed significantly.
“At minimum, a 25-basis-point increase in the policy rate is justified, with readiness to follow through as conditions evolve,” he said.
“The cost of acting late will far exceed the cost of acting now,” Guinigundo added.
“Monetary policy must move ahead of the curve, not behind it.”
