The central bank has finally hinted at acting against the accelerating pace of price increases in the country, hours after the government announced that the March inflation rate blew past official estimates to hit a five-year high.

In a mobile phone message to reporters, Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. said the Monetary Board — whose seven members meet every six weeks to determine the level of domestic interest rates, and consequently help manage the inflation rate — is now tasked to “carefully evaluate the appropriateness of a measured policy response.”

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This response, he said, will be meant to “firmly anchor” inflation expectations to the central bank’s insistence that its targets for the rate of increases in the prices of basic goods and services “will continue to be met in 2018 and 2019.”

On Thursday, the Philippine Statistics Authority said that the inflation rate for March rose to 4.3 percent, breaching the government’s target range of 2-4 percent for the year. This was due to double-digit increases in the prices of so-called “sin” products in the wake of the Duterte administration’s recent tax hikes.

“There’s a pick-up in inflation that we recognize,” Espenilla said, adding that financial markets are already factoring this into their assumptions.

The BSP chief said that whatever the regulators decide to do as part of this “measured policy response” will help in the “orderly adjustment” of market rates and the peso-dollar exchange rate, with the local currency having been under pressure in recent weeks as fund managers repatriate their assets to take advantage of rising yields overseas.

The central bank’s decision to hold off any rate hike during the Monetary Board’s last three policy meetings over the last three months has been questioned by some bankers and economists, but Espenilla stressed repeatedly that regulators do not react to “water under the bridge” and, instead, look to address inflation threats that are just emerging on the horizon. The BSP believes that the current inflation environment is being fueled by “transitory” factors that will normalize by next year.

“We are closely monitoring the situation,” he assured.

In a separate statement released yesterday, the central banks said it continues to expect inflation rate to average “near the high-end of the target range in 2018 before decelerating further to the midpoint of the target range in 2019.”

“The elevated path of inflation in 2018 along with rising inflation expectations will be continually assessed to guard against potential second-round effects from developing and inflation becoming broader based,” the BSP said.

The central bank added that it is counting on “non-monetary measures” such as institutional arrangements in setting transportation fares and minimum wages, unconditional cash transfers and transport subsidies to help mitigate these “inflationary impulses.” /je

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