July 19, 2019 at 08:15 pm
Julito G. Rada
Inflation remained benign and settled at the midpoint of the target range of 2 percent to 4 percent in the second quarter this year, the Bangko Sentral ng Pilipinas said Friday.
The central bank said in a report for the second quarter the inflation rate fell to 3 percent in the second quarter from 3.8 percent a quarter ago. The figure brought the average inflation in the first half to 3.4 percent, which is within the official target range of 2 percent to 4 percent for the full year.
“Inflation continued to ease during the quarter due to the significant deceleration in food inflation amid sufficient domestic food supply,” it said.
Similarly, core inflation slowed to 3.4 percent in the second quarter from 3.9 percent in the previous quarter. Alternative core inflation measures computed by the BSP were also lower in the second quarter.
The easing inflation rate prompted the policy-making Monetary Board of the BSP to keep the benchmark interest rates steady at 4.5 percent on June 20. The interest rates on the overnight lending and deposit facilities were also maintained.
With the manageable inflation environment, the board cut the 2019 inflation forecast to 2.7 percent from the previous assumption of 2.9 percent during the May 9 meeting. It also trimmed the forecast for 2020 to 3 percent from 3.1 percent.
The board on May 9 lowered the policy rates by 25 basis points to 4.5 percent, the first time in more than six years, as inflation continued a downward trajectory.
The following week, the board cut the reserve requirement of universal and commercial banks by 2 percent to 16 percent. It was complemented by a 200-basis point reduction in RRR on May 23 for thrift bank and non-financial institutions with quasi-banking functions, as well as a 100 bps cut for demand deposits of rural and cooperative banks effective May 31.
Inflation peaked to a nine-year high of 6.7 percent in September and October due to higher prices of rice and other food commodities. But it eased to 6 percent in November and 5.1 percent in December as the immediate measures implemented by the government to curb rising consumer prices took effect.