MANILA -- Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said Tuesday they will continue to keep a close watch over price movements despite the significant deceleration in the country's inflation, to ensure that monetary policy remains supportive of growth.
Inflation last April further decelerated to a 16-month low of 3 percent from the previous month’s 3.3 percent. Average inflation in the first four months of the year stood at 3.6 percent, within the BSP’s 2 percent to 4 percent target band from 2018 to 2022.
Diokno, in a statement, said April’s inflation rate is in line with the monetary authorities’ expectation of "within target rate" of price increases for this and next year.
He noted that sustained upticks in the price of oil in the international market, as well as the possible prolonged El Niño pose as upside risks to inflation rate but these are expected to be offset by the dampening global growth.
“Against these upside and downside risks, the BSP continues to keep a close watch over price developments in the country and shall consider all relevant data at its next monetary policy meeting on 9 May 2019 to ensure that the monetary policy stance remains consistent with the BSP's primary mandate of price stability conducive to a balanced and sustainable growth of the economy,” Diokno added.
Last year, the BSP’s policy-making Monetary Board (MB) hiked by 175 basis points (bps) the central bank’s key rates due to elevated inflation, which peaked at 6.7 percent in September and October.
With inflation now back to within-target levels, some analysts have projected the BSP to start cutting rates as early as the first quarter of the year.
Standard Chartered Bank economist for Asia Chidu Narayanan, in a report, forecast a 25 bps reduction in the BSP rates this month and a total of 100 bps for the whole year.
“The combination of falling inflation and slowing growth is likely to lead BSP to start unwinding part if the 175 bps of rate hikes from 2018,” he said.
He projected April inflation to fall to 2.9 percent and to less than 2 percent in the third quarter, with average for the year seen at 2.7 percent.
He also forecast a 200 bps cut in banks’ reserve requirement ratio (RRR) this year as inflation continue to decelerate, which, he said, “is likely to tighten monetary conditions in H2 (2nd semester of 2019).” (PNA)
