BSP sees slight inflation uptick over medium term

Monetary authorities expect prices of goods and services to trend upward over the next two years – coinciding with the Duterte administration’s enactment of new tax measures this year – but assured that the inflation rate will “remain manageable.”

In a press statement, Bangko Sentral ng Pilipinas Gov. Nestor Espenilla Jr. said authorities stand ready to act preemptively if indications emerge that domestic prices will rise beyond levels deemed acceptable by government economic managers.

“Inflation is projected to settle above the midpoint of the target range for 2018 to 2019,” the BSP chief said following yesterday’s announcement that average prices of goods and services rose by 3.3 percent in December 2017 and 3.2 percent for the entire year.

Economic managers have set the government’s inflation target range at 2-4 percent for 2018-2019.

“The BSP expects inflation to remain manageable over the policy horizon as 2017 inflation settled within the National Government’s 3.0 percent ± 1.0 percentage point target range,” he said.

The inflation rate is watched keenly by monetary planners as it is the main indicator that determines the level of interest rates at which BSP transacts with banks, and by extension, determines the borrowing costs and investment returns across the local economy.

Espenilla expressed confidence that the Philippines will continue to experience a positive macroeconomic environment over the medium term.

“Robust domestic economic activity, ample liquidity, and well-anchored inflation expectations continue to support within-target inflation,” he said.

“Looking ahead, the BSP will remain vigilant against any risks to the inflation outlook to ensure that the monetary policy stance remains consistent with the mandate of maintaining price stability conducive to economic growth,” he added.        /kga