BSP Deputy Governor Francisco Dakila Jr.
MANILA -- The Bangko Sentral ng Pilipinas’ (BSP) policy-making Monetary Board (MB) on Thursday lowered to 2.4 percent the central bank’s average inflation forecast for this year from 2.5 percent previously.
“In the discussion, it was noted that inflation is likely to have bottomed out in October and it will start moving close to mid-point of the target by 2020 and 2021 as base effects starts to dissipate,” BSP Deputy Governor Francisco Dakila Jr. said in a briefing after the MB rate setting meet.
The MB, however, maintained the 2.9-percent average inflation forecast for 2020 and 2021, still at the lower half of the government’s 2 percent to 4 percent target band until 2021.
Inflation peaked at 6.7 percent in September and October last year due to supply-side factors like the increase in rice prices because of lack of supply.
However, the problem on rice supply has been addressed after the immediate release of all rice stocks from National Food Authority (NFA) warehouses in the second half of last year and the implementation of the Rice Tariffication Law starting March this year.
On the monetary side, the BSP hiked its key policy rates by a total of 175 basis points to help address inflation expectations.
With these, inflation has sustained its deceleration, although an uptick was registered last May when the rate rose to 3.2 percent from 3 percent in the previous month.
In the first 10 months this year, inflation averaged at 2.6 percent.
Dakila said the base effects are expected to disappear toward the end of the year thus the expectations for a rise of inflation rate near the mid-point of the target band until 2021.
“Base effects, which have been negative up to October, (is) now (expected to) turn to be mostly on the positive side beginning November and continuing on through most of the months of 2020,” he said.
The central bank executive said any “chances of (a) major revision of the inflation outlook is slim.”
He added any change in the projection will “really just a matter of a few basis points.” (PNA)
