MANILA -- Inflation in the Philippines decelerated anew in February to 3.8 percent, which a ranking Bangko Sentral ng Pilipinas (BSP) official said is in line with their expectations.
BSP Deputy Governor Diwa Guinigundo, in a reply to questions from the Philippine News Agency (PNA), said the slowdown of February inflation from 4.4 percent last January “is consistent with our forecasts that for 2019 and 2020, inflation is expected to average at around 3 percent.”
Last February’s inflation rate is already within the government’s 2 percent to 4 percent target until 2022 but the two-month average is still above the target band of 4.1 percent. Inflation is flat compared to the year-ago level of 3.8 percent.
The central bank earlier projected the February 2019 inflation rate to stay within 3.7 percent to 4.5 percent.
Guinigundo said the latest inflation outturn highlights “the non-persistence of supply side pressures we managed in 2018 with the tightening moves of the BSP from May through November.”
BSP’s policy-making Monetary Board (MB) hiked the central bank’s key rates by a total of 175 basis points last year due to big upticks of inflation rate, which peaked at 6.7 percent in September to October, on account of supply-side factors, such as supply issues on rice, fish, and vegetables.
Guinigundo said monetary officials continue to consider current monetary settings as “appropriate given the emerging risks both here and abroad.”
“However, the Monetary Board will be meeting this month precisely to review the stance of monetary policy given the expected new data that would be available from now until the next meeting against the backdrop of a softening global economy,” he said.
Relatively, the BSP, in a statement, said the enactment of the Rice Tariffication Act, which takes effect Tuesday, “will further temper rice prices in the near term and help raise long-run productivity in the agricultural sector.”
“The BSP continues to keep a close watch over price developments in the country and shall consider all relevant information at its next monetary policy meeting on 21 March 2019 to ensure that the monetary policy stance remains consistent with the BSP’s primary mandate of safeguarding price stability,” it added.
Some economists have thus, raised the possibility of further cuts in banks’ reserve requirement ratio (RRR) since this was the direction that late BSP Governor Nestor A. Espenilla Jr. wanted to take as part of more market-based implementation of monetary policy and continued financial market reforms. Guinigundo, however, said that this is “premature to discuss right now, considering that the year-to-date inflation remains above the target of 2 percent to 4 percent.”
“More important, our latest forecasts for the next two years are anchored on the current policy rate of 4.75 percent. But these policy issues will remain on the table. Timing is the crucial issue,” he added.
Banks’ RRR was cut by a total of 200 basis points in 2018 to 18 percent but this remains among the highest in the region.
Espenilla planned to bring the RRR to single-digit level at the end of his term in 2023 but he will not see this materialize, succumbing to cancer on February 23, after more than a year of battling it. (PNA)
