Inflation rate, or the movement in consumer prices, is expected to remain stable over the next four years as the interagency Development Budget Coordinating Committee and the Bangko Sentral ng Pilipinas decided to retain the inflation target range of 2 percent to 4 percent for 2021 to 2024.
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.
“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 BSP said in a statement over the weekend.
It said the inflation target range of 2 percent to 4 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.”
“The assessment of factors that could influence inflation suggests manageable inflation environment over the near term,” it said.
The latest BSP forecasts indicated that inflation would settle within the target range for 2021 to 2022. Inflation expectations are expected to remain firmly anchored to the national government’s target.
The BSP said that for 2023 to 2024, inflation would largely be influenced by the pace of economic recovery in the post-pandemic period.
“The Philippine economy is expected to regain momentum as the health crisis is sufficiently addressed, while macroeconomic policies gain full traction in reviving the economy,” it said.
It said the COVID-19 pandemic could lead to structural changes in supply and demand factors that determine the level of inflation and 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, it said.
Inflation in November accelerated to a 19-month high of 3.3 percent from 2.5 percent in October on higher food prices for the month when a series of strong typhoons entered the country that exacerbated the impact of COVID-19 pandemic.
The November print was also higher than 1.3 percent registered in November 2019.
Inflation in the first 11 months settled at 2.6 percent, within the government’s target range.
Bangko Sentral ng Pilipinas Governor Benjamin Diokno said the November 2020 inflation was “transitory”.
“The November 2020 inflation of 3.3 percent was slightly higher than BSP’s forecast range of 2.4 percent to 3.2 percent, driven mainly by higher food inflation, particularly vegetables, fish, fruits and meat,” Diokno told reporters in a message.
He said the impact of supply disruptions due to recent typhoons was expected to be largely transitory.