BSP has cushion to keep inflation in target

By LEE C. CHIPONGIAN The central bank’s inflation outlook has “ample cushion” to keep within the 2-4 percent government target this year and in 2021 despite various risks including calamities, fuel price volatility and trade wars, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Francisco G. Dakila Jr. said on Friday. “I think the baseline (2.9 percent inflation forecast for 2020 and 2021) can be characterized as having ample cushion for the achievement of the inflation target for both years in the policy horizon,” Dakila said during the presentation of the fourth quarter inflation in 2019. “Even if we look at the impact of various risks that have been identified they still bring us to within the inflation target band so all these latest considerations will be taken into account in coming out with the (latest) baseline,” he added. The next policy meeting of the Monetary Board is on February 6. Dakila said the BSP will be considering more data then including the December and January inflation numbers, as well as the GDP growth results for 2019 full-year and in the fourth quarter. Dakila said the latest GDP statistics is “quite favorable” as it “brings back quite close to the lower end of the government target and it places us in a more comfortable position with respect to the target growth for 2020.” “With respect to the supposed slowing down of economic growth … actually we’ve seen two consecutive (quarters of) growth accelerating (and this) validates factors that led to the slow down (which) are transitory such as the delay in passage of the budget and possibly also the wait-and-see attitude (of investors) due to the (mid-year 2019) election,” said Dakila. BSP Governor Benjamin E. Diokno, in his opening remarks before the inflation briefing, said the numbers continued its easing in the fourth quarter with the average at 1.6 percent from 1.7 percent in the previous quarter. For the full year, inflation averaged at 2.5 percent which was within the two-four percent target. “Likewise, the official core inflation rate decelerated to 2.7 percent year-on-year in the fourth quarter 2019 from 2.9 percent in the previous quarter, suggesting a continued easing in demand-side price pressures,” said Diokno. The BSP chief reiterated that the “downtrend in overall headline inflation may be traced mainly to lower food inflation as domestic rice prices declined with the beginning of the main harvest season and the continued arrival of rice imports. Non-food inflation also decelerated as most subcomponents, particularly those related to utilities, registered slower inflation rates.” “Baseline projections continued to indicate that inflation is likely to remain within the target range (in) 2020-2021. Meanwhile, the balance of risks to the inflation outlook continues to lean slightly toward the upside in 2020 and toward the downside in 2021,” noted Diokno.