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Metrobank downgrades 2023 forecast for PHL average inflation to 5.8%

METROPOLITAN Bank & Trust Co. (Metrobank) said on Thursday that it reduced its full-year average inflation forecast to 5.8% from 6.1% after the consumer price index (CPI) eased in June.

Metrobank Research said in a report that it also revised its 2024 outlook to 4.3% from 4.5%.

Headline inflation eased for a fifth straight month to a 14-month low of 5.4% in June, after a reading of 6.1% in May.

June inflation came in below the 5.5% median estimate in a BusinessWorld poll of 17 analysts conducted last week, and towards the low end of the 5.3-6.1% forecast range issued by the Bangko Sentral ng Pilipinas (BSP).

“Inflation in June supports the expectation that prices are on their way down and that inflation will continue to follow a downward trajectory on account of base effects sans supply and price shocks,” Metrobank Research said.

“Inflation is expected to further decelerate in the coming months, falling within the central bank’s target range of 2% to 4% in the last two months of the year, as base effects and the impact of hikes in the benchmark rates kick in, as well as lower global oil prices on the back of an expected global slowdown,” it added.

However, this could be offset by food supply constraints, especially with the onset of El Niño, and a recently approved wage hike for Metro Manila, Metrobank Research noted.

The BSP will likely pause its benchmark rate due to the downward trend in inflation, it added.

The central bank last month kept benchmark interest rates steady for a second straight meeting at 6.25%. It had raised borrowing costs by 425 basis points between May 2022 and March 2023.

Metrobank Research added that the BSP could cut rates by year’s end as inflation settles within the government’s 2-4% target band. — Aaron Michael C. Sy

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