THE Bangko Sentral ng Pilipinas (BSP) expects inflation to gradually ease over the medium term but remain above the 3-percent target through 2027 amid persistent risks from global oil prices and other supply shocks.
“Over the medium term, we expect inflation to ease gradually,” BSP Governor Eli Remolona Jr. said on Monday during a Development Budget Coordination Committee budget hearing at the House of Representatives.
“However, risks remain tilted to the upside,” he added.
Remolona said inflation had eased in recent months after reaching a three-year peak of 7.2 percent in April, but stressed that consumer price growth remained well above the central bank’s target.
Headline inflation eased to 6.2 percent in July from 6.4 percent in June.
The BSP chief said higher global oil prices and rising inflation expectations were the key risks.
Price pressures could also come from weather disturbances and a possible El Niño episode that could disrupt food supplies.
In a June report, the BSP estimated that there was a 63.3-percent probability that inflation would exceed 4.0 percent in 2027, compared with a 31.8-percent probability that it would fall within the 2.0- to 4.0-percent target range.
The probability distribution becomes more favorable a year later, with the BSP estimating a 45-percent probability that inflation would fall within the target range and a 27.4-percent probability that it would exceed 4.0 percent.
Persistent inflation risks have prompted the central bank to raise key interest rates twice so far this year.
The policymaking Monetary Board raised the benchmark rate by 25 basis points in April and another 25 basis points in June, bringing the rate to 4.75 percent.
Remolona said these moves were carefully calibrated to contain inflation and keep expectations anchored, while also recognizing weakness in economic growth.
“The Monetary Board will meet next week to decide on the next policy action,” he said.
“We look at all the evidence, and we are prepared to take further steps as necessary to ensure that inflation returns to target,” he added.
