MANILA - Inflation in September likely settled within the 4.8 percent to 5.6 percent range, the Bangko Sentral ng Pilipinas' Department of Economic Research said Thursday.

The forecast is above the higher band of the government target of 2 to 4 percent.

Upward adjustments in domestic oil prices, Meralco electricity rates, suggested retail price of basic necessities and prime commodities as well as the prices of select fruits, vegetables, and rice will drive inflation for the month, BSP said.

These could be partially offset by the decline in prices of meat and the slight appreciation of the peso, the central bank said.

"The BSP will continue to monitor emerging price developments to help ensure that its primary mandate of price stability conducive to balanced and sustainable economic growth is achieved," it said.

BSP Deputy Governor Francisco Dakila earlier said inflation could hit 5 percent in September due to the foreseen upward inflationary pressures.

The BSP kept the benchmark borrowing rate at its lowest level of 2 percent for 7 consecutive policy meetings. Monetary policy decisions are largely influenced by inflation.

Analysts predicted that the BSP would start tightening monetary policy next year as the economy recovers from the impact of the COVID-19 pandemic.

Former BSP Deputy Governor Diwa Guinigundo said interest rate adjustments would probably be implemented gradually in 25 basis points or 50 bps increments.

• 'Accommodative' Bangko Sentral keeps interest rate at 2 percent

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