By Lee C. Chipongian
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo said they will maintain its strong tightening bias as they work with government agencies to implement anti-inflation measures.
Diwa Guinigundo, deputy governor of Bangko Sentral ng Pilipinas, attends the Central Banking Forum on the sidelines of the International Monetary Fund (IMF) and World Bank Group Annual Meetings in Nusa Dua, Bali, Indonesia. ( Bloomberg)
Guinigundo, attending this year’s 2018 IMF-World Bank Annual Meetings in Bali Nusa Dua, Indonesia, stressed that non-monetary inflation measures are already working.
He pointed out that the latest headline inflation data which climbed to a nine-year high of 6.7 percent in September year-on-year, showed a drop in core inflation.
“The September data showed that core inflation had declined slightly, demonstrating that the BSPs decisive monetary policy decisions combined with a range of non-monetary actions were starting to have their desired effect,” said Guinigundo during a roundtable meeting on the sidelines of the IMF-World Bank sessions.
He reiterated the data-dependent central bank’s readiness to tighten monetary policy further to curb inflation and ensure price stability. The BSP has raised key rates four times in a row for a cumulative increase of 150 basis points since May this year. Guinigundo maintained that – barring further shocks – inflation may have peaked in the third quarter this year and will decline in 2019 and 2020. In the meantime, the central bank will continue to support the various non-monetary interventions to “further mitigate the impact of supply-side factors on consumer prices.”
Inflation year-to-date now averages at five percent which is above the BSP target of two-four percent. While headline inflation increased to 6.7 percent from 6.4 percent in August, core inflation – which excludes selected volatile food and energy items to measure underlying price pressures -- eased to 4.7 percent in September from 4.8 percent in the previous month. Likewise, month-on-month seasonally-adjusted headline inflation slowed down to 0.8 percent in September from 0.9 percent in August, according to the BSP.
Guinigundo also noted that the exchange rate movements of the peso, while volatile, is expected by the BSP.
“When evaluating the strength of the peso, it’s important to look at the broader, global currency market,” he said, adding that the peso “compared against the currencies of our trading partners relative to inflation, remains both stable and competitive.” The peso at last week's close was still at the P54:$1 level.
Guinigundo is joined by the Budget Secretary Benjamin E. Diokno in these briefing sessions.
“Inflationary pressures in the Philippines will temper over the coming year and return within the target band of two-four percent by 2019.” said Diokno.