BSP Chief Assures President Duterte of Within-Target Inflation Rate for 2017

The Bangko Sentral ng Pilipinas (BSP) on Wednesday assured Malacanang of within-target inflation rate this 2017 after last year’s average fell below the government’s two to four percent target.

In an open letter to President Rodrigo Duterte dated Jan. 20, 2017, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. attributed last year’s inflation results mainly to the impact of lower prices of oil in the international market and its impact on prices of basic commodities.

Rate of price increases averaged 1.8 percent last year despite inflation going back to within-target levels starting in September when it rose to 2.3 percent from month-ago’s 1.8 percent as oil prices started to climb and impact prices of basic goods.

Tetangco said impact of the El Nino and other weather disturbances also pushed inflation up.

”Nonetheless, the supply of food commodities, including rice, remained generally adequate and reined in further increases in food prices,” he said.

The central bank chief said over-supply of oil in the international market helped limit the rise of this commodity’s price and its impact on domestic pump prices, transport fares and electricity rates.

”While international crude prices rebounded in late 2016 following plans of production cutbacks among major oil-producing countries, the increase in prices was not enough to offset the substantial decline seen in 2015. Together, these factors contributed to the slight acceleration in headline inflation, although the full-year average was still below the inflation target for 2016,” he said.

For 2017 to 2018, Tetangco said latest forecast shows that “inflation is likely to return gradually to a path consistent with the inflation target”, referring to the government’s two to four percent target until 2020.

He attributed this projections of continued increase of oil prices after major oil producing countries agreed to cut supply.

”Looking ahead, we also expect the Philippine economy to be able to absorb external shocks and sustain its growth trajectory. Firm domestic demand conditions and ongoing reforms including on the fiscal front, continue to provide solid footing for steady expansion,” he said.

Tetangco said over-all balance of risk “is also tilted to the upside” due partly to electricity rate hike petitions and impact of the government’s tax reform agenda.

He, on the other hand, noted that continued uncertainty in global economic prospects “continues to pose a downside risk to the inflation outlook.”

”We would like to assure the President and the Filipino people that the BSP will continue to closely monitor domestic and external developments that could pose risks to the inflation outlook,” he said, citing its “strong commitment” to achieve the inflation target and ensuring price stability.

”This is to ensure that monetary policy continues to support the economy’s momentum for sustained non-inflationary growth,” he added. (PNA)JMC/JSV/EBP