Sticky core inflation seen to keep BSP on tightening path
Economists suggest that the Bangko Sentral ng Pilipinas may continue its monetary tightening cycle as core inflation remains sticky. Despite easing headline inflation, rising costs in services and energy are driving broader price increases across the economy.
Why it matters
Persistent core inflation influences central bank interest rate decisions, which directly impact borrowing costs and economic growth in the Philippines.
THE BANGKO SENTRAL ng Pilipinas (BSP) could extend its tightening cycle as the widening pass-through effects of energy shocks stemming from the Middle East war are expected to keep core inflation elevated, analysts said.
Metropolitan Bank and Trust Co. (Metrobank) Chief Economist Nicholas Antonio T. Mapa said the faster pace of core inflation, despite easing headline inflation, supports the BSP’s hawkish but measured policy stance.
“With headline inflation receding and core inflation heating up, we are witnessing now what the BSP had been warning us about: second-round effects,” Mr. Mapa told BusinessWorld in a Viber message.
“Even with the initial energy shock dissipating somewhat, firms have passed on the costs for items indirectly related to the first round of price spikes. And thus, the recent uptick in core inflation represents a broadening increase in prices across the CPI (consumer price index) basket,” he added.
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