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Rising consumer prices to stabilize by 2019, says BSP

By: - Reporter / @daxinq
/ 03:42 PM March 06, 2018 FILE PHOTO

It may get worse before it gets better.

The central bank on Tuesday said that the pace of increases in the prices of goods and services in the country will likely remain high for the rest of the year before normalizing in 2019 once so-called “transitory effects” pass.


In a statement to reporters, Bangko Sentral ng Pilipinas Gov. Nestor Espenilla Jr. also downplayed the possibility of a preemptive rate hike on the part of monetary regulators to combat inflation, saying any policy tightening done today will only be felt in 2019 instead of the current year.

“Let’s not forget that monetary policy operates with a long lag,” he said, after the government announced that the inflation rate accelerated to a three-year high of 3.9 percent in February based on the Philippine Statistics Authority’s 2012 base, or 4.5 percent based on the 2006 metric.


“Whatever monetary policy action we do now, will more likely be felt in 2019 and beyond rather than 2018,” Espenilla said. “That’s why we don’t necessarily react to February 2018 but must look much further ahead and rely on forecasts.”

The BSP chief described the “elevated” inflation rate for February as being “in line” with the central bank’s updated forecast for a “temporarily higher inflation than target range in 2018 due to transitory factors.”

The central bank expects that inflation will decelerate back to well within target in 2019 whether based on 2006 or 2012 index, he explained.

“Nonetheless, we will continue to closely monitor the developments and factor in all relevant data in our coming reviews of monetary policy stance,” Espenilla said. “The operative word is temporary. How temporary is temporary is what needs careful analysis.”

The central bank has kept its key overnight borrowing rate — on which banks base their own lending rates — unchanged since September 2014 when it last rates it by 25 basis points.

Espenilla also downplayed the effects of the Duterte administration’s recent tax hike package on domestic prices, saying it was a positive reform measure meant to shore up the fiscal side of the economy. /jpv



Inflation rises to 3.9 percent in February – PSA

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TAGS: Banking, BSP, Business, commodity, Espenilla, Prices
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