WHILE inflation has slowed to 4.8 percent in September according to the state statistics bureau, but many economic observers are convinced that it was not enough to tow the badly bruised economy to safer ground in the coming months.
National Statistician Dennis Mapa said 4.8 was slightly lower compared to the 4.9 percent in August, even as the government's target range for the year is 2 to 4 percent.
Meanwhile, the Bangko Sentral ng Pilipinas' forecast was for inflation to range between 4.8 to 5.6 percent for the month.
“Uncertainty still pervades and no one is really sure if the meager slice in inflation rate will help us in the coming months,” one analyst who requested anonymity for lack of authority to speak on the matter said.
The analyst, however, added that its good thing that Christmas Season is coming which could help in stimulating economic activities that could kick-start expected huge spending by politicians and their supporters next year because of the coming elections.
BSP Gov. Benjamin Diokno said in a statement said the slower inflation for the month was due to slower increase in the transport index.
But he noted that prices could be driven upwards by supply-side factors linked to weather disruptions, global oil prospects, and the continued impact of the African swine fever,
“Inflation could remain elevated in the near term before decelerating to within the target by the end of the year,” he said.
"The return of inflation to the target range is highly contingent on the successful implementation of these supply measures,” Diokno continued.
“The risks to the inflation outlook remain tilted towards the upside for the remaining months of 2021, but remain broadly balanced for 2022 and 2023," he added.
BSP Deputy Gov. Francisco Dakila, for his part said the inflation outlook for 2021 was revised upward to 4.4 percent from 4.1 percent; 3.3 percent from 3.1 percent in 2022, and 3.2 percent from 3.1 percent in 2023 as the economy continued to pick up
The BSP has maintained the country's benchmark interest rate, used by banks to price loans, at 2 percent for almost a year now.
Diokno has said that monetary policy will remain accommodative to support economic recovery.
But some analysts said the central bank could tighten monetary policy soon as the economic recovery gains pace.
To recall, former BSP Deputy Governor Diwa Guinigundo earlier said that BSP is likely to start raising interest rates next year, anchored mainly to the inflation dynamics.
Adjustments to the country's benchmark interest rate can be 25 to 50 basis points at a time, Guinigundo told ANC.
"I don’t think it will happen this year, but probably next year. The BSP has always been gradualist and I think it has been correct to be doing so. And I think it should continue to be gradualist," he said.
The BSP has kept the benchmark policy rate at 2 percent for 7 consecutive monetary policy meetings. It has committed to remain accommodative as long as necessary to support the economy during the pandemic.
"It is also dependent on the path of inflation, phase of inflation. If the phase gets to be more rapid than expected, then you can expect a more sizable adjustment to the policy rate by the BSP," said Guinigundo.
He said the lower and revised economic forecast of 4 to 5 percent for the year is realistically achievable compared to the earlier forecast of 6 to 7 percent.
There have been "early signs" of recovery, including the 11.8 percent economic growth in the second quarter, he noted.
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