The July 2022 inflation outturn of 6.4 percent is within the BSP’s forecast range of 5.6 to 6.4 percent, consistent with the BSP’s assessment of elevated price pressures over the near term on firmer indication of second-round effects.
The BSP recognizes the broadening of price pressures amid the emergence of second-round effects, including the approved wage and fare hikes as well as elevated inflation expectations. The risk to the inflation outlook is tilted on the upside for 2022 and 2023 but is broadly balanced for 2024. Upside risks over the near-term continue to emanate from the higher global non-oil prices driven by the protracted war between Russia and Ukraine as well as from the potential second-round impact of higher oil prices on the prices of goods and services. Domestic food prices also pose upside risks due to shortages in the supply of several key food items. Meanwhile, a slower-than-expected global recovery due to tighter global monetary policy conditions and the continued uncertainty from the COVID-19 pandemic continues to present a downside risk to the outlook.
The BSP is prepared to take all necessary policy action to bring inflation toward a target-consistent path over the medium term and deliver on its primary mandate of price stability. The upward adjustment in monetary policy rates in May and June and the off-cycle adjustment in July should help moderate inflation expectations. At the same time, the BSP reiterates its support for the carefully coordinated efforts of other government agencies in implementing non-monetary interventions to mitigate the impact of persistent supply-side factors on inflation.
The Monetary Board will review its assessment of the inflation outlook along with the latest GDP outturn in its monetary policy meeting on 18 August 2022.