The government kept the inflation target of 2 percent to 4 percent for 2019 and 2020, taking into account the recent deceleration in the increase of consumer prices that is expected to continue in the months ahead, the Bangko Sentral ng Pilipinas said Friday.
The interagency Development Budget Coordination Committee, which includes the Bangko Sentral, also set an inflation target of 2 percent to 4 percent for 2021 and 2022.
“In line with the inflation targeting approach to the conduct of monetary policy, the Development Budget Coordination Committee in coordination with the BSP… decided to keep the current inflation target at 3.0 percent ± 1.0 percentage point for 2019–2020 and to set the inflation target at 3.0 percent ± 1.0 percentage point for 2021–2022,” DBCC said in a statement.
The government’s inflation target is defined in terms of the average year-on-year change in the consumer price index over the calendar year.
The DBCC said the announcement of the inflation target was in line with the central bank’s commitment to transparency and accountability as well as the forward-looking approach in the conduct of monetary policy.
It said the 2 percent to 4 percent target range for 2019–2022 continued to be an appropriate quantitative representation of the medium-term goal of price stability that is optimal for the Philippines given the current structure of the economy and outlook of macroeconomic conditions over the next few years.
“Improved productive capacity of the economy, fueled by higher infrastructure investments by the national government, supports achieving robust economic growth amid a low and stable inflation environment,” DBCC said.
It said recent inflation developments had been driven largely by transitory supply-side factors, such as volatility in international oil prices, higher excise taxes, and weather disturbances that affected food supply, along with moderate demand impulses.
“The BSP’s latest inflation projections indicate that inflation is likely to return to the target range over the medium term as the impact of supply-side shocks dissipate. Likewise, inflation expectations have stabilized and are seen to decline in 2019–2020,” the DBCC said.
Non-monetary measures have also been deployed by the government to address supply shocks directly in the short run and the structural problems in the food and agriculture industry in the long run.
The central bank on Tuesday said the inflation in February likely slowed further to as low as 3.7 percent from 4.4 percent a month ago due mainly to the lower prices of rice.
The Bangko Sentral’s Department of Economic Research projected the February inflation to have settled within the 3.7-percent to 4.5-percent range.
“Higher domestic oil prices and the upward adjustment in electricity rates provided upside price pressures to inflation during the month,” it said.
“These may be partly offset by lower prices of rice and other agricultural commodities given the appreciation of the peso and ample supply particularly of rice following the recent harvest and arrival of rice imports,” it said.