BSP Governor Benjamin Diokno
MANILA – Domestic rate of price increases surpassed the government’s target band for the second consecutive month last February at 4.7 percent but Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno maintains this remains temporary.
In a Viber message to journalists Friday, Diokno said the inflation print in the second month this year, the fifth month of acceleration, is within the central bank’s 4.3-5.1 percent forecast for the month.
“The latest outturn is consistent with the BSP’s assessment of a transitory uptick in inflation in H1 (first half) 2021, reflecting the impact of weather-related disturbances, the African swine fever on food prices, higher global oil prices, as well as positive based effects,” he said.
Average inflation to date stood at 4.5 percent, higher than the 2-4 percent target range until 2023.
Core inflation, which excludes volatile food and oil items, also posted an uptick to 3.5 percent from month-ago’s 3.4 percent, bringing the two-month average of 3.5 percent.
Diokno said supply-side factors continue to drive inflation rate but added: “the overall balance of risks to future inflation continues to lean toward the downside owing mainly to the continued uncertainty caused by the pandemic on domestic and global economic activity.”
Upside risks, in turn, “could emanate from the possibility of an early rollout of Covid-19 (coronavirus disease 2019) vaccines in the Philippines,” he said.
Diokno said since supply-side factors currently drive the inflation rate, there is no need to address this using monetary response “unless they lead to second-round effects.”
“Supply-side shocks are best addressed by non-monetary interventions that ease domestic supply constraints,” he said, citing “direct measures are being pursued by the national government to enhance the availability of affected commodities.”
Diokno said the BSP’s policy-monetary Monetary Board (MB) “will consider carefully recent price developments that could influence the outlook for inflation along with evidence of second-round effects during the monetary policy meeting on 25 March 2021.”
“The BSP stands ready to deploy its full arsenal of instruments as needed in fulfillment of its mandate to maintain price and financial stability conducive to sustainable economic growth,” he added. (PNA)
