Inflation outlook remains manageable

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno

Monetary officials said inflation expectations in the Philippines remain well-anchored even after the rate of price increases surpassed the government’s 2-4 percent target band in January, according to a report by Philippine News Agency. 

The rate of price increases has been on the rise since the last quarter of 2020 and it hit 4.2 percent last January, which authorities point to the rise in global oil prices and costs of some food commodities like meat, which are affected by the African swine fever. 

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In a virtual briefing Thursday, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said while inflation is expected to stay above the target band in the first half of the year, “we are confident that it will taper off in the second half of the year.” 

“We’re confident, moving forward, that inflation will remain to be within our forecast range of 2-4 percent this year, next year, and the year after,” he said. 

The central bank’s average inflation forecast for this year is 4 percent while it is 2.7 percent for 2022. 

Diokno said the elevated inflation rate remains driven by supply-side factors “and so we thought (that) it does not require monetary response at the moment.” 

He said they are currently on the lookout for any spill-over effects, such as an increase in domestic demand and petitions for higher wages or transport costs. 

“But right now, there is no such thing,” he added. 

The central bank chief said the adjustment in the BSP’s policy rates remains data-dependent thus, he discounted any need to change to date as they continue to monitor developments.

Zeno Ronald Abenoja, senior director of the central bank’s Department of Economic Research, said monetary authorities have “supported the implementation of non-monetary measures to directly address the disruptions in supply chain for specific commodities.” 

“Effective implementation of these non-monetary measures should help anchor inflation expectations over the near term,” he said during the same briefing. 

Abenoja was referring to the price cap on some meat products and supply boost to address the constraints, among others.

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