Bangko Sentral ng Pilipinas tames inflation forecasts

December 14, 2018
Banko Sentral ng Pilipinas

Bangko Sentral ng Pilipinas’ (BSP) policy-making Monetary Board (MB) on Thursday dialed back slightly the inflation assumption for 2018-20 after latest forecasts suggest more restrained inflationary pressures in the next two years.

To date, the 2018 inflation forecast is now at 5.2 percent from 5.3 percent during the rate-setting meet of the Board last November 15.

The latest 2019 forecast is down to 3.18 percent from 3.5 percent and in 2020, at 3.04 percent from 3.3 percent.

In a briefing, BSP Assistant Governor Francisco Dakila Jr. said risks to inflation have become more balanced given the deceleration of domestic rate of price increases despite concerns about the global economic growth path.

Other factors that bode well for domestic inflation are the decline in global oil prices and the stabilization of the peso, he said.

Last November, inflation fell to 6 percent from the nearly 10-year high of 6.7 percent last September to October.

Authorities expect the continued deceleration of inflation due to the total of 175 basis points hike in the BSP rates this year and the non-monetary measures implemented since last September, such as the boosting of rice supply through the release of rice stocks in all National Food Authority (NFA) warehouses nationwide.

Dakila said food prices are expected to continue to normalize as issues on rice supply are being addressed and the proposed rice tariffication is up for discussion by the Bicameral Conference Committee.

He also noted the “significant decline in oil prices”, which was a major contributor to the elevated inflation rate in the first three quarters of this year.

He said the price of global crude oil is expected to go down to around USD63 per barrel in 2019 after hitting more than USD80 per barrel last October.

Dakila declined to give any figures for the December 2018 inflation rate, stressing that the BSP remains data dependent.

He, however, stressed that they now see inflation going below 4 percent at the end of the first quarter of 2019. “

“(We are) a lot more comfortable that 2019 inflation target will be achievable,” he said, referring to the two to four percent target for this year until 2020.