Philippines sees 2024 inflation to decelerate within 2 to 4 percent

Goldman Sachs, a financial services group that made this forecast, relies on the expectation of sustained low levels of energy and food prices compared to last year's peaks.

The said financial services group projects a considerable disinflation of approximately 2 percentage points in 2024 across most emerging markets, similar to the trend in developed markets.

Goldman Sachs also predicts a reduction in upward pressure on goods prices as supply chain bottlenecks have largely been addressed. The group anticipates tight labor markets in many economies due to implemented "catch-up" wage increases from the pandemic's peak inflation period. Analysts' consensus forecast for the Philippines in 2024 is a full-year inflation rate of 3.7 percent.

While Goldman Sachs projects 4.2 percent, slightly above the target band, it is an improvement compared to the BSP's own forecast of 4.4 percent.

Regarding interest rates, Goldman Sachs expects most Asian central banks to maintain unchanged policy rates for most of 2024, considering moderating inflation and the United States Federal Reserve signaling a higher-for-longer stance.

The group expects that the Bank of Indonesia (BI) and the Central Bank of the Philippines (CBP) may be the first in the region to cut policy rates late next year, with a projected reduction of 25 basis points each in the fourth quarter. Analysts now expect the CBP to maintain its benchmark rates until the third quarter of 2024 after the recent decision to keep policy rates unchanged during the Nov. 16 policy meeting.

Despite the pause, some observers note that the CBP remains hawkish, given its earlier aggressive monetary policy tightening cycle in the region.