MANILA, Philippines — Inflation could quickly revert back to the Bangko Sentral ng Pilipinas’ two to four percent target due to the implementation of monetary and non-monetary policies.
“A sound monetary policy action continues to be directed toward safeguarding the medium-term inflation target,” said BSP officer-in-charge Ma. Alamasara Cyd Tuaño-Amador during the release of the Q3 2018 Inflation Report.
Latest forecasts showed the consumer price index would breach the central bank’s target this year and next year.
Amador said price increases “could revert more quickly” to target as monetary and non-monetary measures take hold.
The central bank’s Monetary Board has so far raised benchmark rates by 150 basis points. This serves as its major weapon against rising inflation due to higher oil and food prices, weak peso, and the impact of the implementation of Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law.
This brought the rates for the overnight reverse repurchase to 4.5 percent as well as four percent for the overnight deposit facility and five percent for the overnight lending facility.
Amador said the BSP remains committed in combating inflation and ensuring price stability.
“The need to proactively manage risks from broader inflation pressures and second-round effects, as well as the need to anchor and cement inflation expectations constituted the main impetus for strong monetary policy actions. While we believe the country’s fundamentals remain solid and healthy, a robust monetary response can help reduce exchange rate volatility,” Amador said.
Amador said the volatile foreign exchange market stems from the increasing uncertainty on the global economic front particularly in so far as escalation of trade tensions is playing in the market.