MANILA: Philippine central bank Governor Eli Remolona said on Saturday that supply shocks could derail the bank’s forecast that inflation will decelerate back to its target range.

The Southeast Asian economy is “not out of the woods yet” as supply shocks could trigger second-round effects and heighten inflation expectations, the Bangko Sentral ng Pilipinas chief told a press conference.

A rate cut in the first half of the year is unlikely but possible, Remolona said.

The central bank has raised its benchmark rate by 450 basis points since May 2022 to rein in inflation, including an off-cycle hike in October before holding steady at its final two meetings of 2023.

World Bank says Philippines economy to grow 5.6% this year, below govt target

Headline inflation last month returned to target to 3.9%, but average inflation for 2023 stood at 6.0%, way above the central bank’s 2%-4% target.

The rate-setting monetary board next meets on Feb. 15 to review interest rates.