The BSP’s latest baseline forecasts indicate a higher inflation path over the policy horizon, with average inflation breaching the upper end of the 2-4 per cent target range in both 2022 and 2023 at 5.8 per cent and 4.3 per cent respectively. The forecast for 2024 has also risen slightly to 3.1 per cent.
In deciding to raise the policy interest rate anew, the monetary board noted that core inflation has risen sharply in October, indicating stronger pass-through of elevated food and energy prices as well as demand-side impulses on inflation.
At the same time, the risks to the inflation outlook lean strongly toward the upside until 2023 while remaining broadly balanced in 2024.
Upside risks are associated with elevated international food prices owing to higher fertiliser costs, trade restrictions and adverse weather conditions.
On the domestic front, the impact of weather disturbances on the prices of fruits and vegetables, supply disruptions in key food commodities, as well as pending petitions for transport fare hikes could also exert upward pressures on inflation.
Meanwhile, the impact of a weaker-than-expected global economic recovery continues to be the main downside risk to the outlook.
ALCHEMPro News Desk (DS)
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