MANILA -- The further slowdown of the Philippines’ inflation rate to 5.1 percent in December 2018 clearly shows that the big jumps in inflation during the first three quarters of last year were mainly supply-driven and were therefore short-lived, according to a top monetary official.
Bangko Sentral ng Pilipinas (BSP) Officer-in-Charge and Deputy Governor Diwa Guinigundo said the month-on-month inflation last December showed a -0.6 percent figure and the deseasonalized series showed a -0.4 percent month-on-month change.
“Those are negative inflation rates that should tell us that indeed the supply-driven inflation process we saw in 2018 was not to be persistent and therefore short lived,” he said, citing that the “this is also true of the impact of the tax reform package whose annual impact was less than one percentage point and diminishing.”
Data released by the Philippine Statistics Authority (PSA) on Friday showed that inflation averaged at 5.2 percent last year, above the central bank’s two to four percent target band.
Inflation in December 2017, meanwhile, is lower at 2.9 percent.
Excluding volatile food and oil items, core inflation last December also slowed to 4.7 percent from month-ago’s 5.1 percent, resulting to an average of 4.2 percent for the year.
Guinigundo, thus, pointed out that the total of 175 basis points increase in the BSP’s key rates from May to November 2018 “was therefore aimed only at ensuring that the supply shocks from more than 60 percent increase in oil prices and the significant inflation rates of rice, fish, meat and vegetables did not evolve into sharp gains in wages, transport fares and prices of other services.”
“Without a monetary response, it would have been possible for inflation expectations to be disanchored beyond reasonable proportions,” he said.
Aside from the BSP’s monetary policy hikes, the central bank official said that the non-monetary measures ordered by Malacanang to be implemented starting last September to aid supply-issues also helped in slowing inflation rate.
These measures include boosting domestic rice supply through the release of rice stocks from all warehouses of the National Food Authority (NFA) nationwide as well as additional importation of rice and other food items and its safe delivery from ports to warehouses and eventually the markets.
Malacanang also directed officials of several agencies to monitor price movements and prevent hoarding.
Guinigundo said this directive addressed possible additional food price upticks
Additional boost to inflation would be the rice tariffication measure, which is awaiting President Rodrigo R. Duterte’s signature.
“We are optimistic that with the early implementation of the rice tariffication law and sustained reforms in supply logistics we should be seeing low and stable inflation this year and 2020,” Guinigundo said.
To date, the central bank forecasts average 2019 inflation to be at 3.2 percent while its three percent for 2020.
“With lower price movement, we could be optimistic about the growth prospects and their positive feedback to inflation,” the central bank official said.
Guinigundo said monetary officials “shall continue to confront the issue of inflation with appropriate and vigilant stance of monetary policy in recognition of the remaining risks both here and abroad without losing sight of the requirements of economic growth.”
“But the BSP shall also keep on relying on the analytics of what recent data would suggest in terms of the direction and magnitude of any potential monetary action,” he added. (PNA)
