Non-monetary measures to address supply-side inflation risks

Non-monetary measures to address supply-side inflation risks

MANILA – The Bangko Sentral ng Pilipinas (BSP) has reiterated the need for efficient implementation of non-monetary policy measures to address supply-side inflation risks following the slowdown of the domestic rate of price increases last month.

The Philippine Statistics Authority (PSA) on Tuesday reported that the inflation rate in the ninth month this year decelerated to 4.8 percent from the 32-month high of 4.9 percent in the previous month due mainly to slower upticks in the transport index.

It brought the nine-month average to 4.5 percent, above the government’s 2 percent to 4-percent target band.

Excluding the volatile food and energy items, core inflation was flat at 3.3 percent compared to the previous month’s level. Average core inflation to date stood at 3.3 percent.

In a Viber message to journalists, BSP Governor Benjamin Diokno said the September 2021 inflation print was at the lower end of the central bank’s 4.8 percent to 5.6 percent forecast range for that month.

Diokno said the elevated inflation rate is expected to remain in the coming months before slowing to within-target levels before the end of this year.

He said supply-side factors continue to drive the domestic inflation rate, citing the impact of weather disturbances, global oil prospects, and the African swine fever (ASF).

“These supply side shocks are best addressed by timely non-monetary policy interventions that could ease domestic supply constraints. The return of inflation to the target range is highly contingent on the successful implementation of these supply measures,” he added.

With the projected elevated inflation rate in the near-term, Diokno said “risks to the inflation outlook remain tilted towards the upside for the remaining months of 2021, but remain broadly balanced for 2022 and 2023.”

He identified the sources of upside risks as the pressures on commodity prices in the international market, the effects of weather disturbances, and prolonged recovery from the ASF outbreak.

These factors, however, are expected to be countered by the spread of more contagious variants of the coronavirus disease 2019 (Covid-19) and the weaker-than-expected global growth prospects.

“Looking ahead, the BSP stands ready to maintain its accommodative monetary policy stance for as long as necessary to support the economy’s sustained recovery to the extent that the inflation outlook would allow,” Diokno added. (PNA)

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