Government team to review 2002 inflation target

The country’s economic team said yesterday it will review this year’s inflation target of five to six percent after the first quarter.

In yesterday’s economic briefing, Budget Secretary Emilia Boncodin who chairs the interagency Development Budget Coordinating Council (DBCC) said the review is significant because any revision or adjustment in the inflation numbers will also mean similar revisions in other key macroeconomic targets such as the gross domestic product (GDP) and the 91-day Treasury bill rate.

This was echoed by Gilbert Llanto, deputy director general of the National Economic and Development Authority (NEDA).

"Those targets are for review. As for inflation, it has to be determined by the DBCC in late March of early April.

Llanto said stable food supply and prospects of lower-than-anticipated prices of oil products in the world market make it likely the target inflation this year may have to be brought lower.

On the other hand, Bangko Sentral ng Pilipinas Deputy Governor Amando Tetangco Jr. said a downscaling of the inflation number will also force the central bank to review its monetary policy.

"Any revision in inflation obviously has implications on monetary policy planning," Tetangco said, adding the outlook of lower inflation in the next two months increases the possibility the Monetary Bank will cut its policy rates by another 25 basis points.

He added key aggregate monetary levels such as domestic liquidity, reserve money and others will be reviewed.

Boncodin said there is an agreement between the DBCC and the BSP wherein the DBCC will set the inflation target but it will be the central bank that will announce the target and ensure the target is met. "This will be started next month," Boncodin said.

Earlier, BSP Governor Rafael Buenaventura said a downward revision of this year’s inflation target to four to five percent will provide the BSP more room to further cut off its key interest rates, possibly by 50 to 100 basis points.