Inflation seen surpassing target this year amid risks

Inflation seen surpassing target this year amid risks

MANILA – Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno on Tuesday said the full-year inflation average is expected to surpass the government’s target band even as risks to the inflation outlook remain broadly balanced.

The Philippine Statistics Authority (PSA) reported the deceleration of the domestic inflation rate in the third month this year to 4.5 percent from month-ago’s 4.7 percent, ending the five-month rise since the last quarter of 2020.

Average inflation in the first quarter of this year stood at 4.5 percent, surpassing the government’s 2-4 percent target band until 2023.

Diokno said last month’s inflation print is within the central bank’s 4.2-5 percent target band for March.

“The overall latest outturn is consistent with expectations that inflation could settle above the high end of the target in 2021, reflecting the impact of supply-side constraints on domestic prices of key food commodities, such as meat, as well as the continuing rise in world oil prices,” he said in a Viber message to journalists.

Diokno said a tighter domestic supply of meat products and improved global economic activity could lend further upward pressures on inflation.

“However, ongoing pandemic also continues to pose downside risks to the inflation outlook as the recent surge in virus infections and challenges over mass vaccination programs continue to temper prospects for domestic demand,” he added.

Monetary authorities forecast this year’s inflation to average at 4.2 percent while next year’s average inflation forecast is 2.8 percent.

“Supply-side influences (will) subside,” he said. “At the same time, timely and effective implementation of direct measures by the national government could contribute to easing price pressures.”

Diokno said the policy-making Monetary Board (MB) continues to see “prevailing monetary policy settings remain appropriate to support the government’s broader efforts to facilitate the recovery of the economy.”

He said the Monetary Board emphasizes that the timely implementation of non-monetary interventions is important in mitigating the impact of supply-side pressures on inflation and thereby preventing them from spilling over as second-round effects.

“Looking ahead, the BSP will remain watchful for any signs of inflation becoming broader-based. The BSP is prepared to take immediate measures as appropriate to ensure that the monetary policy stance continues to support the BSP’s price and financial stability objectives,” he added. (PNA)

Leave a Reply