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Supply shocks may derail 2024 inflation target

Metro Manila (CNN Philippines, January 20) — The government’s baseline inflation forecast for this year could be derailed by supply shocks, particularly surrounding rice, Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona said Saturday.

“Our baseline forecast for inflation for 2024 is around 4%, 4.2%, not quite within range but close to being within range, so within target, within striking distance of the target,” Remolona said in a forum.

The government’s target inflation range is from 2% to 4%. In December last year, price movements slowed to 3.9%.

“Supply shocks may derail that forecast given what’s going on with rice, and imports of rice. We produce rice, El Niño is a factor, it depends on those things,” he said.

This is after the country ended 2023 with the highest rice price inflation since March 2009. Meanwhile, a “strong” El Niño is forecast to scorch the country until February.

“We began to realize that supply shocks are very important for inflation outlook, not only because of the shocks themselves, because the shocks are expected to dissipate but because of the second round effects of those shocks which we see in the prices of services, for example, wages, transport fares,” Remolona said.

“We’re not out of the woods. We don’t see a smoking gun.” he added

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