Monetary officials have forecast inflation to dip to less than 2 percent in December 2020 and January 2021 but assured the public that this is not worrisome and will only be due to higher year-ago rates.
In a briefing streamed over the Bangko Sentral ng Pilipinas’ (BSP) Facebook page on Thursday, BSP Deputy Governor Francisco Dakila Jr. said the month-on-month inflation rate was 0.7 percent in December 2019 and 0.6 percent in January 2020.
“This is something that is really very temporary. It is not something that should be a major basis for setting monetary policy,” Dakila said.
The inflation rate was 2.5 percent in December 2019 and 2.9 percent in January 2020.
Monetary officials forecast inflation to average 2.3 percent this year, 2.8 percent in 2021, and 3 percent in 2022.
Dakila said while average inflation is expected to rise in the next two years, the figures are still within the government’s 2 percent to 4 percent target band until 2022.
“This also reflects the expected recovery in demand as the economy likewise recovers in 2021 and 2022,” he said.
During the same briefing, it was reported that inflation in the third quarter of this year inched up to 2.5 percent year on year from quarter-ago’s 2.3 percent and year-ago’s 1.7 percent.
This was traced to the higher rate of price increases of non-food items, particularly transport services and domestic petroleum products.
However, these factors were countered by lower food inflation.
In this year’s first quarter, inflation averaged 2.5 percent.
BSP Governor Benjamin Diokno said the inflation outlook in the near term leans on the downside, given the dampened demand on account of the pandemic.
Diokno said monetary authorities have decided to take a pause from their aggressive monetary policy actions, which resulted in the 175 basis points reduction in the central bank’s key rates since the start of the year, “to allow prior actions to continue to work their way through the economy.”
“At the moment, monetary policy settings are sufficiently accommodative to mitigate the strong downside risks to growth,” he said.
Diokno said the weak domestic demand is expected to recover with the help of both monetary and fiscal policies, as well as the continued re-opening of the economy.
“On the part of the BSP, we wish to assure the public of our commitment to data-driven monetary decision-making to enable the Philippines to navigate through the pandemic with minimal economic scarring,” he said. “In this regard, the BSP will continue to deploy its full range of three monetary instruments and regulatory relief measures, as needed, in fulfillment of its mandate of promoting non-inflationary and sustainable economic growth.”
Source: Philippines News Agency