MANILA – The pandemic-hit domestic demand is expected to counter any second-round effects of elevated inflation rate and not add any price pressures, a ranking Bangko Sentral ng Pilipinas (BSP) said.
In a virtual briefing Thursday, BSP Monetary Policy Research Group Director Dennis Lapid said monetary authorities continue to be on the lookout for developments like petitions for fare and power rate hikes on account of the faster rate of price increases.
“The risks of second round effects (of elevated inflation) will temporarily counterbalance also with the amount of slack in the economy given that domestic demand is still in the very stages of recovery. So, that will tend to, I think, dampen the pressure from second round effects,” he said.
Lapid said inflation expectations of private economists, based on the survey conducted by the central bank, indicate a within-target outlook for this and next year.
Inflation accelerated for five consecutive months since October 2020 due to supply-side factors, particularly the lack of pork supply because of the impact of African swine fever (ASF), and the rise in global oil prices.
It breached the government’s 2-4 percent target band last January when it hit 4.2 percent, and further rose to 4.7 percent in the following month.
It, however, decelerated to 4.5 percent last March and April, bringing the year-to-date average to 4.5 percent.
BSP’s average inflation forecast for this year is 3.9 percent, while it is 3 percent for next year.
During the same briefing, BSP Governor Benjamin Diokno cited the rise in global oil prices due to recovery of demand and the supply cuts by oil producers.
He said local authorities are closely monitoring global oil price developments since the Philippines is an oil importer and any changes on this impact the domestic inflation.
Citing reports by the World Bank (WB) and the International Monetary Fund (IMF), Diokno said the two institutions forecast global oil prices to average higher than USD50 per barrel this and next year.
He said the effect of oil price developments is among the factors being considered by BSP officials in determining their inflation projections.
While oil prices are seen to remain high, he said the baseline inflation path “is projected to be target-consistent over the policy horizon.”
“However, the BSP will continue to monitor and update the oil price outlook as it remains highly uncertain given evolving developments related to the pandemic and the uneven global recovery,” he added. (PNA)
