BSP now more confident inflation will settle at 3% in 3Q

Published May 7, 2019, 12:00 AM

by manilabulletin_admin

By Lee C. Chipongian

With a lower April inflation, central bank officials are more confident now that the consumer price index will hit the midpoint of the two-four percent target – or about three percent year-to-date (YTD) – by the third quarter this year.

MB file photo.
MB file photo.

In a statement, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said they continue to monitor and assess risks to inflation expectations as inflation continues its downward path.

“Against these upside and downside risks, the BSP continues to keep a close watch over price developments in the country and will consider all relevant data at its next monetary policy meeting on May 9 to ensure that the monetary policy stance remains consistent with the BSP’s primary mandate of price stability conducive to a balanced and sustainable growth of the economy,” said Diokno.

He said however that the continued increase in global crude oil prices and possibility of a prolonged El Niño episode “could be a source of upside price pressures over the near term. On the other hand, the weakening global economic environment could present downside risks to inflation.”

BSP Deputy Governor Diwa C. Guinigundo said that YTD inflation could settle at 3 percent in the third quarter.

“The April inflation rate of 3 percent continues the disinflationary trend we have been seeing since October 2018 when inflation came down from 6.7 percent to 6.68 percent,” said Guinigundo.

“This is very encouraging as it confirms the BSP’s view that YTD average inflation will finally settle at around the midpoint of the two-four percent target by around the third quarter of 2019,” he added.

The YTD inflation has decreased to 3.8 percent in the first quarter from 5.9 percent in the previous quarter. Guinigundo said YTD inflation has also slowed down to 3.6 percent in January-April.

Still, while inflation is showing all signs of a downtrend, the BSP is closely monitoring upside risks to inflation. “We continue to keep our ears on the ground because of the upside risks to inflation including the prolonged El Niño phenomenon and the elevated oil prices,” said Guinigundo.

The three percent April inflation is within the BSP’s forecast for the month of 2.7 percent to 3.5 percent.

Guinigundo has said that inflation could still be in the midpoint level for April because of higher domestic oil prices and upticks in electricity costs.
April inflation is lower than March’s 3.3 percent, February’s 3.8 percent and January’s 4.4 percent.

The central bank’s inflation forecast for 2019 and 2020 is 3 percent. These estimates will possibly change this Thursday after the Monetary Board’s policy rate review.