Inflation in January 2023 likely accelerated to as high as 8.3 percent from the 14-year high of 8.1 percent in December on the back of higher prices of electricity, fuel and food items, the Bangko Sentral ng Pilipinas said Tuesday.

In a statement, BSP projected the January 2023 inflation to settle within the range of 7.5 to 8.3 percent.

“Upward price pressures for the month are expected to emanate from higher electricity rates, approved water rate rebasing, higher domestic petroleum prices, uptick in the prices of key food items, and the annual increase in sin taxes,” it said.

The BSP, however, said Filipinos might have found relief last month from lower LPG prices and the strengthening of the Philippine peso.

The BSP said it is prepared to “adjust its monetary policy stance at the necessary pace” to temper inflation.

The December outturn was significantly faster than the 3.1 percent in the same month in 2021. It brought the full-year average to 5.8 percent in 2022, well beyond the government’s target range of 2 to 4 percent and faster than the average of 3.9 percent in 2021.

In an open letter to President Ferdinand Marcos Jr. on Jan. 24 that explained why inflation in 2022 hit 5.8 percent, the BSP said any further monetary policy actions would always depend on pertinent economic data.

“The BSP will continue to adjust its monetary policy stance as necessary to keep further second-round effects at bay and to prevent inflation expectations from becoming disanchored,” read the letter signed by Deputy Governor Francisco Dakila Jr. as officer in charge.

“Our approach to monetary action will remain data-dependent and contingent on the inflation outlook, along with other available macroeconomic information at a given point in time,” the BSP said.

Headline inflation started to rise in March last year as domestic fuel pump prices increased, reflecting the uptrend in international crude oil prices. Global crude oil prices increased significantly in 2022 amid concerns over tighter supply arising from the geopolitical conflict in Eastern Europe and from major oil-producing countries’ decision to lower production targets, the letter said.

Meanwhile, as inflation began to spike across countries and central banks responded with tighter monetary policy, investor concerns over global demand also tempered further price increases, it said.

Additionally, a confluence of global and local supply shocks drove food prices higher. On the external front, higher energy prices led to significant increases in fertilizer and farming costs. Concerns over food security also prompted countries to impose export restrictions, resulting in tighter global supply of key food commodities.

Domestically, animal diseases such as the African Swine Fever (ASF) and Avian Influenza (AI) affected domestic meat production. The impact of successive typhoons on agricultural production, particularly in the second half of 2022, also added to the supply-side constraints on some key food items like fish and vegetables.

According to the BSP, the effects of low agricultural productivity combined with lingering import restrictions also kept sugar and food prices high.