FRESH PICKS. A stall inside the Mega Q Mart in Quezon City sells a wide selection of vegetables on Tuesday (June 6, 2023). Finance Secretary Benjamin Diokno said inflation in June 2023 is seen to further slow down to 5.4 percent, mainly driven by the negative base effects from higher food and transport inflation in the same month last year. (PNA photo by Joan Bondoc)
MANILA – Department of Finance Secretary Benjamin Diokno said he is in favor of maintaining the current policy rate at 6.25 percent.
In his weekly press chat, Diokno said that during the central bank's monetary board meeting last week, he voted for a pause in the monetary policy settings given the continued reduction in price momentum in recent inflation performance and the downward trend in inflation projections.
"Furthermore, maintaining the current policy rate could help preserve the country’s buffer against external shocks and would allow direct measures of the national government to impact inflation dynamics," Diokno said.
"I think we will continue to maintain, maybe a long pause, I don’t see any cut within maybe until we really have strong evidence of a decline," he added.
Latest data from the Philippine Statistics Authority showed that headline inflation was at 6.1 percent in May, significantly lower than the 6.6 percent in April.
Diokno said inflation in June 2023 is seen to further slow down to 5.4 percent, mainly driven by the negative base effects from higher food and transport inflation in the same month last year.
"We are expecting the inflation rate to be within [the target] range, meaning 2-4 percent by the end of the fourth quarter. It might settle at 4 percent level by the end of the fourth quarter. If we're lucky, by September which is third quarter. And then our expectation is that it might be below 2 percent in the first quarter of next year because of the base effects," Diokno said.
Once inflation settles within this level, Diokno said the central bank might consider cutting policy rates.
"Globally, inflation is still persistent. We're just trying to be more conservative," Diokno said.
Diokno noted that the balance of risks to the inflation outlook remains tilted towards the upside due to persistent constraints in the supply of key food items, the potential impact of El Niño on food prices and utility rates, possible second-round effects on agricultural prices from higher toll rates, as well as the effects of probable additional adjustments in transportation fares and wages.
"Considering the current economic situation and government actions, maintaining an unchanged policy rate is deemed necessary while ensuring that the central bank remains prepared to take action if needed," he said.
Diokno assured that a whole-of-government approach would continue to be implemented to address price pressures, temper inflationary expectations, and mitigate the impact of inflation on the Filipino people and the economy.
This includes the reconstitution and reorganization of the Economic Development Cluster to the Economic Development Group and the creation of the Inter-Agency Committee on Inflation and Market Outlook.
The government is also planning to establish an inter-agency committee on food logistics to improve the supply chain of food products. (PNA)
