The Market Monitor Minding the Nation's Business
The February 2023 inflation outturn of 8.6 percent is within the BSP’s forecast range of 8.5 to 9.3 percent. Inflation is projected to remain above the target until early Q4 2023 before decelerating close to the low end of the target range by January 2024 due mainly to negative base effects and the likely decline in global oil and non-oil prices. The inflation path continues to be driven by supply-side factors as pressures from elevated global and domestic commodity prices broaden.
At the same time, the risks to the inflation outlook are tilted to the upside for both 2023 and 2024. The potential impact of uncertainties in the global food market, increased domestic prices of key food items facing supply constraints, additional transport fare hikes due to elevated oil prices, and higher-than-expected wage adjustments in 2023 are the major upside risks to the inflation outlook. Meanwhile, the impact of a weaker-than-expected global recovery is the primary downside risk to the outlook.
The Monetary Board will review its assessment of the inflation outlook in its monetary policy meeting on 23 March 2023. The BSP remains prepared to adjust its monetary policy settings as necessary to prevent inflation expectations from becoming disanchored and safeguard the inflation target over the policy horizon. The BSP also continues to call for the timely and effective implementation of non-monetary government measures to mitigate the impact of persistent supply-side pressures on inflation.