Pantheon says BSP tightening cycle likely over as inflation to further ease - BusinessWorld Online

By America Pulse · Based on reporting from bworldonline.com

Pantheon Macroeconomics, a United Kingdom‑based think tank, says the Bangko Sentral ng Pilipinas (BSP) is likely to pause any additional tightening of monetary policy as inflation appears set to fall below the central bank’s revised projections. Chief Emerging Asia Economist Miguel Chanco and Asia Economist Meekita Gupta argue that the BSP’s latest outlook is overly pessimistic.

Inflation Outlook

After its August policy review, the BSP adjusted its full‑year inflation forecasts to 6.1% for 2026 (down from 6.4%), 5.4% for 2027 (down from 4.5%), and 3.3% for 2028 (down from 3.1%). Chanco and Gupta contend these numbers are too bleak, especially the 2027 estimate, which they say will be heavily influenced by base‑effect dynamics.

August Inflation Forecast

Pantheon projects that August will mark the fourth consecutive month of easing inflation, aligning with market consensus at a 6% headline rate. The analysts note that inflation likely slipped to 6% in August from 6.2% in July, driven largely by favorable food‑price base effects. A modest 0.1‑percentage‑point uptick in transport costs, they add, should temper any sharper headline decline.

Market Expectations

A BusinessWorld poll of 20 analysts conducted last week produced a median forecast of 6% for August’s headline figure, down from July’s 6.2% but up from a 1.5% year‑over‑year gain. If the forecast materializes, the pace would be the slowest in four months, matching the 4.1% rate recorded in March. Nonetheless, inflation would still sit above the BSP’s 3% target for a sixth straight month, pushing the eight‑month average to 5.1%.

Core Inflation

The Philippine Statistics Authority is slated to publish the official August inflation numbers on Friday, Sept. 4. In parallel, Chanco expects core inflation—excluding volatile food and oil—to ease to 4.1% in August from 4.2% in July, offering additional reassurance to policymakers at the BSP.

Monetary Policy

In May, the Monetary Board enacted its third back‑to‑back 25‑basis‑point hike, lifting the benchmark rate to a little over one‑year high of 5%. With inflation projected to continue moderating, Pantheon Macroeconomics anticipates that the BSP will refrain from further tightening in the near term.

Source: bworldonline.com · 2026-09-01