Gov’t adjusts inflation outlook to 4-4.5%

Inflation would likely accelerate faster than earlier expected for the full-year 2018 given the rate registered in the first five months of the year, the inter-agency Development Budget Coordination Committee (DBCC) said Monday.

In a press conference in Manila City, Budget Secretary Benjamin Diokno said the DBCC adjusted its inflation outlook to 4.0- to 4.5-percent for whole of 2018 from 2.0 to 4.0 percent.

The forecast recognizes how the inflation rate registered at a faster pace in the first five months of the year.

Cid Terosa, dean at the University of Asia and the Pacific (UA&P) School of Economics, said the revision would bring the inflation outlook to a more realistic level.

“The new forecast is more realistic and a better guide for making business, investment, and consumption decisions,” he said.

“In recognition of what already happened in the first half of the year, year-to-date is 4.1 percent,” Diokno said when asked about the need to adjust the inflation outlook.

Despite the revision, the government kept its inflation target of 2 to 4 percent for the year.

“We expect inflation to taper off in the second half of the year. That’s how confident the (Bangko Sentral ng Pilipinas) is. Inflation has been decelerating, the rate of increase month-on-month has been declining,” Diokno said.

Inflation accelerated by 4.6 percent in May, the fastest in more than five years.

The central bank takes inflation into account when making a policy decision, particularly on rates.

The BSP tightened key policy rates by 25 basis points last month.  It raised overnight borrowing to 3.5 percent, overnight lending to 4 percent, and overnight deposit to 3.0 percent.

The policy-setting Monetary Board also increased policy rates by 25 basis points on May 10, on the heels of concerns about an accelerating inflation.

Inflation accelerated by 4.6 percent in May, the fastest in more than five years.

First Metro Investment Corp. (FMIC) and UA&P are now expecting the BSP to raise rates anew in the fourth quarter of the year. —VDS, GMA News