Last year’s high inflation episode will be a thing of the past with the rate of increase in consumer prices this year and next year expected to return within the government’s target band, according to the Bangko Sentral ng Pilipinas (BSP).

“Average inflation rose quickly above the government target in 2018. In response, the BSP raised its policy rate decisively four times by a cumulative 175 basis points beginning in May 2018 to rein in inflation expectations and prevent sustained supply-side price pressures from driving further second-round effects,” BSP Governor Nestor A. Espenilla Jr. said in a speech read for him by officer in charge and Deputy Governor Chuchi G. Fonacier during the BSP’s annual reception for the banking community Friday night.

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New or higher excise taxes slapped on consumption, skyrocketing global oil prices during the third quarter of 2018, as well as food supply bottlenecks, especially rice, pushed inflation or the rate of increase in prices of basic commodities to a 10-year high of 5.2 percent last year.

Elevated inflation was partly blamed for slowing economic growth to a three-year low of 6.2 percent in 2018.

Moving forward, the BSP’s latest forecasts “indicate that inflation will return to the 2-4 percent target this year and in 2020,” Espenilla said.

The BSP chief nonetheless said that they “approach the year with utmost vigilance and prudence, mindful of the unfolding global economic landscape.”

“There are still significant lingering concerns and imminent risks particularly on the external front. But we cannot allow these headwinds from deflecting us from our deep financial reform agenda,” Espenilla said.

Also, he said, “there is the challenge of keeping an eye out for signs of excessive credit and leverage in the financial system.”

“While we continue to see the Philippine banking system as currently being in a position of relative strength, we need to push for necessary financial sector reforms to propel us toward a more sound, stable and inclusive financial system,” according to Espenilla.

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