MANILA – Rate of price increases further decelerated to 2.1 percent last May from April’s 2.2 percent primarily due to the drop in the annual inflation rate of the transport index.
It averaged at 2.5 percent to date, within the government’s 2 to 4 percent target band until 2022.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno, in a Viber message to journalists Friday, said the inflation rate in the fifth month this year is within the central bank’s 1.9 to 2.7 percent forecast band for the month.
“The latest inflation number is consistent with the prevailing assessment by BSP that inflation is expected to remain benign over the policy horizon due largely to the adverse impact of the (coronavirus disease 2019) pandemic on the domestic and global economy,” he said.
He explained that for the whole of this year and next year, baseline projection shows that inflation will settle below target.
Specifically, monetary officials forecast inflation to average at 2 percent this year and 2.5 percent next year.
Relatively, while the economy will take a hit from the global pandemic, Diokno said it “is expected to bounce back to its potential output growth in 2021 once the impact of the government’s fiscal and monetary measures gain traction.”
He said the main inflation risks to date are the volatility of oil prices in the international market and international rice supply because of lower output among producers in the Association of Southeast Asian Nations (Asean) due to the drought in the Mekong Delta.
Because of these risks, Diokno reiterated the BSP’s “support for urgent and carefully coordinated measures with other government authorities to ease the adverse effects of the coronavirus pandemic on individuals and firms, with a view toward preventing any long-lasting economic and social damage.”
“In addition to the monetary policy actions that have been deployed so far, the BSP stands ready to use all available measures in its policy toolkit as it continues to assess the impact of the global pandemic on the domestic economy and the Filipino people,” he added.
Among these monetary policy actions are the total of 125 basis points reduction in the central bank’s key policy rates, the 200 basis points cut in universal and commercial bank’s (U/KBs) reserve requirement ratio (RRR), and the decision to consider as RRR compliance banks’ loans to micro, small and medium enterprises (MSMEs).