BSP sees benign inflation until 2022

INFLATION is expected to stay within the target range over the next two years, despite a recent uptick in global oil prices as well as food prices due to supply disruptions caused by typhoons, the central bank said.

“We do not have soaring prices so there’s no stagflation happening and we do not think that’s really a threat because the main reason is that we see inflation keeping within the target range over the policy horizon,” Bangko Sentral ng Pilipinas (BSP) Officer-in-Charge Francisco G. Dakila, Jr. said in a briefing.

The central bank expects inflation this year to average 3.2%, much higher than the 2.6% print last year. By 2021, it expects a softer headline inflation of 2.9%.

In December, the BSP maintained its 2-4% inflation target range until 2024.

The consumer price index rose 3.5% in December, marking the fastest print since the 3.8% in February 2019, due to higher food prices and transport costs.

“The latest uptick in inflation is clearly attributable to short-term considerations…. It would have happened whether [or not] we had made the policy adjustments,” Mr. Dakila said.

The central bank slashed rates by a total 200 basis points last year — with the latest rate cut done through a 25-basis-point cut in November.

Mr. Dakila noted that Region 2 (6.6%) Region 3 (4.5%), Calabarzon (4.4%) and Bicol Region (6.6%) registered the fastest annual inflation.

“What are the common characteristics of these regions? They are the regions that are most affected by the typhoons [in the latter part of last year],” Mr. Dakila said.

“The recent uptrend in inflation is seen to be largely transitory, reflecting the short-term impact of recent typhoons,” he added.

Officials have recognized the African Swine Fever outbreak continues to push pork prices higher this month.

Moving forward, Mr. Dakila said risks to the inflation trajectory remain mainly tilted to the downside due to slow recovery of demand and continued risks from the pandemic.

“However, upside inflation risks are also a possibility due to supply-side risks such as weather disturbances and rising crude oil prices,” he said. — Luz Wendy T. Noble

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