Prices of basic goods and services accelerated beyond the central bank’s forecast range for November, due mainly to a spike in food prices caused by the recent spate of typhoons.
Despite this, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said the 3.3-percent inflation rate for last month was a temporary phenomenon.
In a mobile phone message to reporters on Friday, the central bank chief said that the average inflation rate is still expected to settle “within the government’s target range of 3 percent, plus or minus 1 percent for 2020-2022, as the impact of supply disruptions due to recent typhoons is expected to be largely transitory.”
The November 2020 inflation was slightly higher than BSP’s forecast range of 2.4-3.2 percent, driven mainly by higher food inflation, particularly for vegetables, fish, fruits and meat.
As this developed, the central bank said “downside risks” to the global and domestic economy remain despite recent progress in the development of vaccines for COVID-19.
“Logistical challenges in the distribution of the vaccine would have to be addressed before the recovery could resume,” Diokno said. “In the near term, uncertainty remains high following the resurgence of the virus in the US, Europe and parts of Asia.”
He warned that the reimposition of lockdowns could further dampen economic recovery.
Last month, the central bank implemented a surprise 25-basis point rate cut, lowering its key interest rate further to an all-time low of 2 percent.
With the spike in the November inflation rate, the resulting negative real interest rate now stands at 1.3 percent, representing the net erosion in the purchasing power of the peso.
On Thursday, Diokno called for more fiscal spending programs to take advantage of the cheap cost of funds in the local financial system, amid emerging data that banks continue to avoid risky lending activities and borrowers continue to shy away from loans—activities that could help restore economic growth.
Nonetheless, he stressed that monetary authorities were prepared to do more, going forward.
“The BSP stands ready to deploy its full arsenal of instruments, as needed, in fulfillment of its mandate to maintain price and financial stability conducive to sustainable economy growth and employment,” he said.