BSP to study if inflation rate calls for policy change

The Bangko Sentral ng Pilipinas (BSP) will take a closer look if the latest inflation data warrants a monetary policy adjustment, after inflation hit 4.5 percent in February.

“Based on our best estimates, yes, inflation will be rising this year, but we believe it will be transitory,” BSP Governor Nestor Espenilla Jr. said during an economic briefing by the Management Association of the Philippines (MAP) in Makati City.

The Philippine Statistics Authority (PSA) reported that inflation accelerated to 4.5 percent in February, the fastest in over three years.

While it exceed government’s 2- to 4-percent target range, the central bank needs to conduct a study if this would warrant a policy shift, Espenilla noted.

“The operative word is temporary. How temporary is temporary is what needs careful analysis,” he said.

“Also, let’s not forget that monetary policy operates with a long lag. Whatever monetary policy action we do now, will more likely be felt in 2019 and beyond rather than 2018,” he said.

During a policy meeting in February, the central bank’s Monetary Board noted inflation would likely settle at 4.3 percent this year.

Espenilla expects inflation to decelerate back in the 2.0- to 4.0-percent range next year.

“That’s why we don’t necessarily react to February 2018 but must look much further ahead and rely on forecasts,” he said.

The BSP will have its next policy meeting on March 22. —VDS, GMA News