Supply shocks could keep Philippine inflation above target: central bank chief

PHILIPPINE central bank governor Eli Remolona said on Saturday (Jan 20) that supply shocks could derail its forecast that inflation will decelerate back to its target range.

The South-east Asian economy is “not out of the woods yet” as supply shocks could trigger second-round effects and heighten inflation expectations, the Bangko Sentral ng Pilipinas chief told a press conference.

A rate cut in the first half of the year is unlikely but possible, he added.

The central bank has raised its benchmark rate by 450 basis points since May 2022 to rein in inflation, including an off-cycle hike in October before holding steady at its final two meetings of 2023.

Headline inflation last month returned to target, at 3.9 per cent, but average inflation for 2023 stood at 6.0 per cent, way above the central bank’s target range of 2 to 4 per cent.

The rate-setting monetary board will meet on Feb 15 to review interest rates.