The inter-agency Development Budget Coordination Committee kept the inflation target at 2 percent to 4 percent for the next three years, Bangko Sentral ng Pilipinas said Wednesday.
The inflation target is expected to guide the government’s budget and private sector’s investment plan from 2016 to 2018.
Bangko Sentral said in line with the inflation targeting approach to the conduct of monetary policy, the DBCC issued Resolution No. 2015 on Dec. 29 to maintain the current inflation target range.
It said the fixed annual target for 2016 to 2018 set by the government “remains suitable to the Philippine economy and is consistent with the country’s evolving price dynamics and sustained economic growth objectives.”
Bangko Sentral said the current low inflation environment could be sustained over the medium term as underlying structural inflation dynamics remained favorable, with the improved ability of the domestic economy to accommodate supply shocks.
It said compared to pre-inflation targeting period, the headline inflation had been observed to return faster to the target while the influence of the foreign exchange rate had diminished.
“Structural reforms in the economy could generate further productivity gains and raise the economy’s growth potential, allowing the economy to grow at a respectable rate while maintaining prices stable. Greater transparency in the conduct of monetary policy also enabled the firmer anchoring of inflation expectations to the inflation target,” Bangko Sentral said.
The medium-term inflation target was set by the DBCC in coordination with Bangko Sentral under the inflation targeting framework.
The announcement of the target was in line with the Bangko Sentral’s commitment to greater transparency and accountability in the conduct of monetary policy.
“Going forward, the BSP will continue to ensure that the monetary policy stance remains appropriate, consistent with its primary mandate of safeguarding price stability conducive to a balanced and sustainable economic growth,” it said
Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. earlier said inflation rate in December likely accelerated from 1.1 percent recorded in November on higher power and food prices.
Tetangco said despite the expected higher inflation print for December, the average inflation for 2015 would fall below the 2 to 4 percent target range for the year. The government is set to release the December inflation after the New Year.
Inflation hit a record low of 0.4 percent in October and averaged 1.4 percent in the first 11 months of 2015.
The Monetary Board, the policy-making body of Bangko Sentral, on Dec. 17 kept the benchmark interest rates steady for the tenth consecutive time since October last year as inflation rate settled below the target range.
Key policy rates were maintained at 4 percent for overnight borrowing and 6 percent for overnight lending.