What Inflation Rate Does BSP Predict for December? 1.2% to 2.0%!

In December 2023, the Philippine central bank, Bangko Sentral ng Pilipinas (BSP), projected annual inflation to range between 1.2% to 2.0%, a slight increase from November's rate of 1.5%. This forecast comes as the BSP continues its strategy of cutting the benchmark policy rate for the fifth consecutive time on 11 December, aiming to stimulate economic growth while indicating that its easing cycle is approaching its conclusion.

Last updated: 11 December 2023 (BST)

What’s happening now

The latest inflation forecast from the BSP signifies a cautious outlook as the economy navigates post-pandemic recovery. With inflation expected to hover between 1.2% and 2.0%, there are concerns about how this will impact consumer spending and overall economic stability in the Philippines. The bank’s decision to lower interest rates aims to encourage borrowing and investment but raises questions about the sustainability of growth amidst fluctuating inflation rates.

Key takeaways

• The BSP forecasts December inflation at 1.2% to 2.0%, slightly above November's 1.5%.
• This marks the fifth consecutive rate cut by the BSP to stimulate economic growth.
• The central bank indicates that its easing cycle is nearing its end.

Timeline: how we got here

Over the past year, the BSP has implemented a series of monetary policy adjustments in response to economic fluctuations. Here’s a brief timeline:

• January 2023: Initial discussions on interest rate adjustments begin as inflation concerns rise.
• March 2023: The BSP raises the benchmark rate to combat increased inflation pressures.
• June 2023: Inflation rates begin to stabilize, prompting a review of the rate strategy.
• October 2023: BSP announces its first rate cut, signalling a shift towards economic support.
• December 11, 2023: The BSP cuts the benchmark rate for the fifth time and forecasts inflation for December.

What’s new vs what’s known

New today/this week

The BSP's updated inflation forecast for December indicates a range of 1.2% to 2.0%, reflecting the central bank's ongoing assessment of economic conditions and inflationary pressures. This is the latest in a series of adjustments as the BSP seeks to balance growth with price stability.

What was already established

Previously, the BSP had noted a consistent inflation rate around 1.5% in November 2023. This stability prompted discussions on potential rate cuts as the economy showed signs of recovery from the pandemic's impacts, suggesting a proactive approach from the BSP in managing monetary policy.

Impact for the UK

Consumers and households

For UK consumers, fluctuations in inflation rates abroad can affect import prices and overall inflationary trends. A stable Philippine economy could mean more predictable pricing for UK imports from the Philippines, particularly in sectors like agriculture and manufacturing.

Businesses and jobs

UK businesses with ties to the Philippines may see shifts in supply chain dynamics as the Philippine economy adjusts to monetary policy changes. This could influence hiring practices and operational costs, particularly in sectors reliant on Philippine exports.

Policy and regulation

The BSP’s actions may prompt the UK government to review its trade agreements and economic partnerships with the Philippines, ensuring that they remain beneficial amidst changing economic landscapes.

Numbers that matter

• 1.2% - 2.0%: The projected inflation range for December 2023.
• 1.5%: Inflation rate recorded in November 2023.
• 5: Number of consecutive rate cuts made by the BSP as of December 2023.

Definitions and jargon buster

• BSP: Bangko Sentral ng Pilipinas, the central bank of the Philippines responsible for monetary policy.
• Benchmark policy rate: The interest rate set by a central bank that influences overall economic activity.

How to think about the next steps

Near term (0–4 weeks)

In the immediate future, businesses and consumers should monitor inflation trends closely as they could influence spending and investment decisions. The BSP's policy moves will likely continue to be a focal point for economic discussions.

Medium term (1–6 months)

As the BSP signals the end of its easing cycle, stakeholders should prepare for potential stabilisation in interest rates, which may affect borrowing costs and investment strategies across various sectors.

Signals to watch

• Future inflation reports from the BSP.
• Monetary policy announcements from the BSP.
• Trends in global economic conditions that could impact the Philippines.

Practical guidance

Do

• Keep abreast of inflation reports and economic forecasts.
• Evaluate financial strategies in light of potential interest rate changes.
• Engage in discussions with business partners about supply chain implications.

Don’t

• Ignore the potential impacts of changing monetary policies on your business.
• Assume that current inflation rates will remain stable in the long term.
• Neglect to consider international economic conditions that might affect domestic markets.

Checklist

• Review your financial plans in response to BSP's rate decisions.
• Assess the impact of inflation on your household budget.
• Stay informed about global economic trends that could affect local markets.

Risks, caveats, and uncertainties

While the BSP's forecasts provide a clear framework for understanding potential inflation trends, uncertainties remain. Global economic conditions, including supply chain disruptions and geopolitical tensions, could impact inflation rates in unpredictable ways. Stakeholders should remain cautious and flexible in their planning.

Bottom line

The BSP's recent rate cuts and inflation forecasts highlight a delicate balance between stimulating growth and managing inflation. For UK readers, staying informed about these developments is crucial, as they can have ripple effects on global trade, consumer prices, and economic partnerships.

FAQs

What is the current inflation forecast for the Philippines?

The Philippine central bank forecasts inflation for December 2023 to be between 1.2% and 2.0%, slightly up from the previous month's rate of 1.5%.

Why did the BSP cut interest rates?

The BSP cut interest rates to bolster economic growth amid fluctuating inflation rates, aiming to encourage borrowing and investment.

What does the end of the easing cycle mean?

The end of the BSP's easing cycle suggests that the central bank may not continue to lower interest rates, potentially stabilising borrowing costs and influencing future economic conditions.