The decline in global oil prices will likely cause headline inflation to hit 4.1% in December, according to an economist on Tuesday.
Rizal Commercial Banking Corporation (RCBC) chief economist, Michael Ricafort said that the headline inflation eased to 4.1 percent in November, which is slightly higher than the government’s 2 to 4 percent target range.
Ricafort mentioned several factors that could relatively help slow down inflation, such as better weather conditions and the absence of heightened geopolitical risks, such as the Israel-Hamas war that could affect world oil prices.
“Provided [also that there will be] no large storm or El Niño drought damage that tends to increase food prices, for the rest of 2023, headline inflation could be around 4 percent for December 2023 or possible to already within the 2 to 4 percent inflation target,” he said.
Moreover, he said that easing inflation in recent months would allow the Bangko Sentral ng Pilipinas (BSP) to maintain policy rates.
“Thus, easing inflation trend in recent months, still relatively stronger peso exchange rate versus the US dollar in about 4.5 months, and 5-month lows for global crude oil prices would support a pause in local policy rates, or at least reduce the urgency for any additional local policy rate hikes, especially if the Israel-Hamas war does not spread in the Middle East,” he added said.
So far, the BSP has kept policy rates unchanged for two consecutive meetings.
Currently, the BSP’s Target Reverse Repurchase Rate is at 6.50 percent. Meanwhile, the overnight deposit and lending facilities’ interest rates are at 6.0 percent and 7.0 percent respectively.
