The Bangko Sentral ng Pilipinas (BSP) has set the two-four percent inflation rate target for 2023 until 2024, the same goal range for 2021 and 2022, indicating stable consumer goods prices, as the economy, currently in recession, recovers from COVID-19 pandemic.

“For 2023 to 2024, inflation would largely be influenced by the pace of economic recovery in the post-pandemic period,” the BSP said in a statement, adding that the economy is expected to regain momentum as the health crisis is sufficiently addressed, while macroeconomic policies gain full traction in reviving the economy.

“Nonetheless, the COVID-19 pandemic could lead to structural changes in supply and demand factors that determine the level of inflation as well as affect the country’s future productive capacity. This reinforces the important role of the inflation target as an important guidepost for the BSP in ensuring inflation remains low and stable, which will be conducive to long-term economic growth,” said the BSP.

The inflation-targetting BSP continues to assess that inflation will be manageable over the near term and that inflation expectations will remain “firmly anchored” to the two-four percent target.

The inter-agency Development Budget Coordination Committee (DBCC) approved last December 3 the inflation target range for 2023 and 2024.

The BSP stated that under the inflation targeting framework for monetary policy, the target is defined in terms of the average year-on-year change in the consumer price index over the calendar year.

It also stated that this announcement of the medium-term inflation target is in line with the BSP’s commitment to transparency and accountability as well as the forward-looking approach in the conduct of monetary policy.

“The inflation target range (of two-four percent) as approved by the DBCC, continues to be an appropriate quantitative representation of the medium-term goal of price stability that is optimal for the Philippines given the current structure of the economy and outlook of macroeconomic conditions over the next few years,” said the BSP.

For 2020, the BSP cut the policy rate by 200 basis points (bps), bringing the overnight reverse repurchase facility or RRP rate to a flat two percent. The real interest rate, which is below the average inflation level of 2.6 percent, is in the negative territory. November inflation climbed to a 19-month high of 3.3 percent from 2.5 percent in October mainly due to higher food inflation, and surpassing the BSP forecast for the month of 2.4-3.2 percent.

For 2020 inflation, the BSP forecasts 2.6 percent, and 3.2 percent and 2.9 percent for 2021 and 2022, respectively. The DBCC has an inflation assumption for 2020 of 2.4 percent to 2.6 percent, and 2-4 percent for 2021 and 2022.