After struggling last year with the sharpest spike in consumer prices to hit the country in a decade, the government’s economic managers expect the economy to experience low inflation for the rest of the term of President Duterte.
Thus said the Bangko Sentral ng Pilipinas (BSP), which stressed that it would remain vigilant in ensuring that the inflation rate would remain within the targeted level of 3 percent, plus or minus 1 percentage point from this year until 2022.
“The BSP remains steadfast in its commitment of maintaining price stability conducive to a balanced and sustainable economic growth,” Deputy Governor Cyd Tuaño-Amador said in a statement.
In 2018, the inflation rate averaged 5.2 percent due to tightness in rice supply and other agricultural products, increase in world oil prices and the aggravating effects of a legislated tax increase. This prompted the BSP to implement a series of rate hikes that eventually totaled 175 basis points after initially insisting for a few months that the inflation rate would correct itself without the need for policy intervention.
Tuaño-Amador—who sits as the central bank’s officer-in-charge pending Mr. Duterte’s appointment of a permanent governor—added that “the BSP will continue to monitor closely price developments and ensure that the monetary policy stance remains appropriate in keeping inflation within target.”
In the statement, the BSP deputy chief said that in line with the inflation targeting approach to the conduct of monetary policy, the Cabinet-level Development Budget Coordination Committee decided to keep the current inflation target at 3 percent, plus or minus 1 percentage point for 2019–2020 and to set the inflation target at the same level for 2021–2022.
The government’s inflation target is defined in terms of the average year-on-year change in the consumer price index over the calendar year.
“The announcement of the inflation target is in line with the BSP’s commitment to transparency and accountability as well as the forward-looking approach in the conduct of monetary policy,” she said.
“The inflation target for 2019–2022, approved by the national government, continues to be an appropriate quantitative representation of the medium-term goal of price stability that is optimal for the Philippines given the current structure of the economy and outlook of macroeconomic conditions over the next few years,” Tuaño-Amador added.
She explained that “improved productive capacity of the economy, fueled by higher infrastructure investments by the national government, supports achieving robust economic growth amid a low and stable inflation environment.”
The central bank said recent inflation developments had been driven largely by transitory supply-side factors like volatility in international oil prices, higher excise and weather disturbances that affected food supply, along with moderate demand impulses.