BSP, confident of inflation slowdown, seen keeping monetary policy untouched | Inquirer Business

BSP, confident of inflation slowdown, seen keeping monetary policy untouched

By: - Reporter / @daxinq
/ 06:15 PM July 06, 2021

MANILA, Philippines — The pace of price increases for basic goods and service in the country was expected to decline toward the end of the year, the Philippine central bank said on Tuesday (July 6), a prediction that was reinforced by new data showing the inflation rate declining to its lowest in six months.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said that the consumer price index will remain relatively high for now, with June 2021 inflation—4.1 percent—being “consistent with expectations that inflation could remain above target in the near term as meat and oil prices remain elevated.”


The latest inflation rate was within the BSP’s forecast range of 3.9 to 4.7 percent.

In a meantime, the regulator noted that a major contributor to the slower pace in inflation for last month was the lower annual rate of increase in the transport index—9.6 percent, down from 16.5 percent in May 2021.


“Average inflation is projected to settle at the high end of the target range of 2 to 4 percent in 2021,” the BSP said. “However, price pressures are seen to abate leading to the reversion of average inflation near the midpoint of the target in 2022 to 2023.”

According to the monetary regulator, the effective implementation of direct non-monetary measures will be crucial in mitigating further supply-driven pressures, adding that the risks to the inflation outlook also “remain broadly balanced.”

“The uptick in international commodity prices owing to supply-chain bottlenecks and the recovery in global demand could lend upward pressures on inflation,” it said. “However, downside risks to the inflation outlook continue to emanate from the emergence of new coronavirus variants, which could delay the easing of lockdown measures and temper prospects for domestic growth.”

Despite the decline in inflation rate, ING Bank Manila senior economist Nicholas Mapa said the BSP was still not likely to alter its monetary policy course anytime soon, with the BSP chief Benjamin Diokno intent on keeping interest rates low to help the Philippine economy recover from its worst slump since World War II in 2020.

“Diokno has signaled that he will likely retain his accommodative stance for at least another year as he provides monetary support for the economic recovery,” Mapa said. “BSP has looked past the 6-month inflation target breach citing the need to deliver stimulus at a time of economic struggle and stalling inflation will relieve some pressure on the central bank to hike policy rates to combat inflation.”

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TAGS: Bangko Sentral ng Pilipinas, Business, economy, Inflation, monetary policies, Prices
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