Philippines to bring inflation below 4% by Q3

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Jan 23 (Reuters) – Annual inflation at 14-year highs in the Philippines is likely to ease to below 4% by the third quarter and then 2% by the start of the year next, as aggressive tightening and supply-side intervention take root, its central bank governor said on Monday.

“We expect to be very successful in reducing inflation,” Bangko Sentral ng Pilipinas Governor Felipe Medalla said at an investment forum in Frankfurt.

Medalla said that the high inflation was fueled by supply shocks, so the government’s plan to speed up the import of certain commodities such as onion and sugar, together with a stricter policy, should help address prices keep rising.

President Ferdinand Marcos Jr, who is also minister of agriculture, said he was determined to slow down inflation, which last month accelerated to a new 14-year high of 8.1%.

“What I lose sleep over every night is how to reduce inflation,” he said in the interview shown on the Facebook page of state-controlled PTV.

Marcos recently approved the emergency importation of onions to address soaring prices that have contributed to inflation, but said it will take some time before the measure has an impact.

Retail prices of onions have risen to 700 pesos ($12.83) per kilogram in recent days in Manila markets, among the highest in the world, according to some economists.

Food prices helped push up the consumer price index last month by 8.1% from a year earlier, the fastest rise in 14 years, bringing average inflation to – full year to 5.8%, outside the target range of 2% -4% of the central bank.

BSP’s Medalla signaled further interest rate hikes at the central bank’s first two policy meetings this year to bring inflation back within a target range of 2% to 4 %.

The BSP, which raised its benchmark interest rate by a total of 350 basis points last year, will hold its first policy meeting of 2023 on February 16. ($1 = 54.5800 Philippine pesos) (Reporting by Neil Jerome Morales and Karen Lema in Manila; Editing by Martin Petty)

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