Inflation risks still ‘broadly balanced’

Published June 4, 2021, 4:01 PM

by Lee C. Chipongian

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said Friday that risks to the inflation outlook remains “broadly balanced” but also crucial for inflation control that there is enough meat in the coming months.

“(The) projected decline of inflation depends crucially on the timely arrival of pork to help stabilize domestic prices,” said Diokno. He reemphasized the temporary tariff cuts on imported pork to “address supply constraints and ease price pressures on meat products going forward.”

Diokno quoted the BSP’s mid-term inflation statement following the May inflation report of 4.5 percent, the same as the inflation for April and March.

The BSP’s point inflation projection for May was 4.4 percent. Its forecast range was four percent to 4.8 percent for the month.

“(The inflation) outturn is consistent with expectations that inflation could remain above the high-end of the target range during the quarter as meat and oil prices remain elevated. Nonetheless, the BSP expects inflation to decelerate to within the target range by the second half of 2021 to 2022 as domestic supply bottlenecks are addressed,” said Diokno.

In the meantime, risks to the inflation outlook are still broadly balanced. “The risks relate to the arrival of pork imports at lower tariffs, the successful reopening of the domestic economy, and the pace of the global economic recovery,” said Diokno.

The BSP’s Monetary Board will meet on June 24 for its next policy meeting. It has kept the benchmark rate at a flat two percent for the past three meetings.

ING Bank economist Nicholas Mapa said he still expects the BSP to leave current rates alone. “(The BSP will) extend its pause for the balance of the year while penciling a possible rate hike by the third quarter 2022 as economic conditions improve considerably.”

Mapa said there were also no surprises for the May inflation report and that it is in line with market consensus. “May marks the fifth month inflation has stayed above the central bank’s two-four percent inflation target with the usual suspects of food and transport costs keeping the headline reading elevated,” he said.

The BSP’s latest inflation forecasts for 2021 is 3.9 percent and three percent for 2022 – both averages are within the target band of two-four percent.