PHILIPPINE headline inflation is expected to settle within the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target band this year despite the slight uptick in November and the impact of recent typhoons on prices, Metropolitan Bank & Trust Co. (Metrobank) Research said.
“Despite the acceleration of prices in November, the latest inflation print is consistent with our forecast that inflation will remain below the 3% level in the last few months of 2024,” Metrobank Research said on Monday.
In November, headline inflation picked up to 2.5% year on year from 2.3% in October, but it was slower than 4.1% in the same month a year ago. This brought average inflation to 3.2% in the 11 months.
“The year-to-date inflation confirms that full-year inflation will likely settle within the 2-4% BSP target this year even with supply-side shocks brought by typhoons and geopolitical tensions,” Metrobank said.
A series of storms hit the Philippines in November, resulting in around P10 billion worth of agricultural damage according to the Department of Agriculture.
National Economic and Development Authority Secretary Arsenio M. Balisacan earlier said the series of typhoons likely had a “sharp” impact on fourth-quarter growth, particularly the agricultural sector.
Metrobank Research said inflation will still be “target consistent” until 2026.
It kept its average full-year forecast at 3.2% this year and in 2025, as it “expects higher demand-side pressure as the BSP continues to reduce policy rates.”
“We maintain our 3% full-year average forecast for 2026, barring any supply-side shocks,” Metrobank Research said.
The BSP expects inflation to average 3.1% this year, 3.2% in 2025, and 3.4% in 2026.
“Recent sentiments from BSP Governor Eli M. Remolona, Jr. suggest he retains his dovish stance, emphasizing that the Philippines is ‘still in the easing cycle’ and signaling the possibility of another cut in the December meeting,” Metrobank Research said.
“Moreover, the lower-than-expected gross domestic product (GDP) print in Q3 provides more reason for the BSP to deliver another 25-basis-point (bp) cut to further maintain momentum in consumption and investment growth.”
In the third quarter, GDP growth slowed to 5.2% from the revised 6.4% growth in the second quarter and 6% a year ago. This was also the weakest growth in five quarters or since the 4.3% expansion in the second quarter of 2023.
For the first nine months of the year, GDP growth averaged 5.8%, slower than the 6% print a year ago.
Economic managers last week revised its growth target range to 6-6.5% this year, narrower than the previous 6-7% goal.
“As the inflation projection continues to remain within target, Metrobank Research maintains its forecast of another 25-bp cut in the BSP’s meeting in December, bringing its year-end forecast for the Reverse Repurchase (RRP) rate to 5.75% in 2024,” it said.
BSP began its easing cycle with a 25-bp cut in August, followed by another 25-bp cut in October, bringing the benchmark rate to 6%.
The Monetary Board is set to have its final policy-setting meeting for the year on Dec. 19.
Metrobank also expects the RRP rate to settle at 5% by 2025 and 4.25% by 2026. — A.R.A.Inosante