Consumer prices seen to stabilize by 2019
The central bank yesterday said the pace of increases in the prices of goods and services in the country would likely remain high for the rest of the year before normalizing in 2019 once the so-called “transitory effects” of the tax reform law pass.
In a statement, Bangko Sentral ng Pilipinas Governor 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 would 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 the February 2018 (inflation) 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 BSP expects inflation to decelerate back to well within target in 2019 whether based on 2006 or 2012 index, he said.
“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.
Espenilla has 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.
