With a moderating inflation path, the central bank’s Monetary Board is expected to keep the benchmark rate unchanged at 6.5 percent on Thursday, Feb. 15 for its first policy meeting for the year, according to Moody’s Analytics.

In its weekly Asia Pacific market review, Moody’s Analytics echoed most of the market sentiments that the Bangko Sentral ng Pilipinas’ (BSP) policy-making arm, the Monetary Board, will not take action this week.

“With inflation cooling, BSP will hold the policy rate steady” on Thursday, it noted.

The Philippines reported a lower January inflation rate of 2.8 percent versus 3.7 percent in December. This was the second month that the consumer price index (CPI) was within the government target of two percent to four percent.

Moody’s Analytics said inflation “slowed significantly” because of a “high base effect as inflation peaked a year ago.” The January 2023 CPI was very high at 8.7 percent.

Last week, when the government announced the latest CPI data, the BSP again said that it was necessary to maintain a sufficiently tight policy rate until the inflation path is convincingly within the target range.

For the Feb. 15 policy meeting, the BSP will base its decision on two crucial data which is the 5.6 percent 2023 gross domestic product (GDP) growth and January 2024 inflation rate of 2.8 percent.

The BSP said the January CPI remains consistent with its expectations that inflation will likely moderate in the first three months of the year, mostly because of negative base effects and “some easing of supply constraints affecting key commodities.”

However, the central bank said inflation “could temporarily accelerate above the target range from Q2 (second quarter) 2024 due to the impacts of El Niño weather conditions and positive base effects.”

“The balance of risks to the inflation outlook still leans significantly towards the upside,” said the BSP. These key upside risks include: potential pressures emanating from higher transport charges; increased electricity rates; higher oil prices; and higher food prices due t strong El Niño conditions.

Meanwhile, the impact of a relatively weak global recovery and the government measures to mitigate the effects of El Niño could ease some price pressures, it also said.

The BSP forecasts that for 2024, the inflation rate could settle slightly above the target range at 4.2 percent, based on its risk-adjusted projection.

But generally, the central bank is hoping the inflation path will close the year below four percent and is maintaining a hawkish monetary policy stance to manage inflation expectations.

The central bank is expected to revise the current 4.2 percent risk-adjusted inflation forecast for 2024 this week. The expectation is that the new 2024 CPI average estimate will be below four percent.