Government Keeps Inflation Target at 2 to 4% Range

In line with the inflation targeting approach to the conduct of monetary policy, the Development Budget Coordination Committee (DBCC) in coordination with the Bangko Sentral ng Pilipinas (BSP), through DBCC Resolution No. 2019-1 dated February 26, 2019, decided to keep the current inflation target at 3.0 percent ± 1.0 percentage point for 2019–2020 and to set the inflation target at 3 percent ±1.0 percentage point for 2021–2022. The government’s inflation target is defined in terms of the average year-on-year change in the consumer price index (CPI) over the calendar year. The announcement of the 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 3.0 percent ±1.0 percentage point inflation target for 2019—2022, approved by the National Government (NG), 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. Improved productive capacity of the economy, fueled by higher infrastructure investments by the NG, supports achieving robust economic growth amid a low and stable inflation environment.

Moreover, recent inflation developments have been driven largely by transitory supply-side factors, e.g., volatility in international oil prices, higher excise taxes, and weather disturbances that affected food supply, along with moderate demand impulses. The BSP’s latest inflation projections indicate that inflation is likely to return to the target range over the medium term as the impact of supply-side shocks dissipate. Likewise, inflation expectations have stabilized and are seen to decline in 2019—2020. Non-monetary measures have also been deployed by the NG to address supply shocks directly in the short run and the structural problems in the food/agriculture industry in the long run.

The BSP remains steadfast in its commitment of maintaining price stability conducive to a balanced and sustainable economic growth. Going forward, the BSP will continue to monitor closely price developments and ensure that the monetary policy stance remains appropriate in keeping inflation within target.

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