Inflation to hover above target range in first half — BSP’s Diokno

Inflation is expected to hover above the government's target range of 2% to 4% in the first six months of the year, but will stabilize in the second half as supply-side issues are addressed, the Bangko Sentral ng Pilipinas (BSP) said Thursday.

At a virtual briefing, BSP Governor Benjamin Diokno reiterated that inflation continues to accelerate on issues on the supply of commodities such as oil and food.

"We recognize that the inflation might be slightly elevated and will be beyond our 2-4% forecast for the first half of the year but we are confident that it will taper off in the second half of the year," he told reporters.

Inflation clocked in clocked in at 4.2% in January to mark the fastest pace in two years since the 4.4% in January 2019. It was also the fourth straight month of acceleration.

"We recognize that the factors explaining the elevated inflation is not due to demand side but on the supply side, meaning the rise in oil prices and the rise in some food prices because of some factors and so we thought it does not require a monetary response at the moment," said Diokno.

"We are confident moving forward that inflation will remain to be within our forecast range of 2-4% this year, next year, and the year thereafter," he said, with the BSP penciling in inflation at 4% this year and 2.7% in 2022.

Diokno warned, however, that should demand-side issues, it would be a concern for the central bank but assured that there is still no data pointing to such a scenario.

"Right now there is no such thing. As I said, BSP policy-making is data dependent and so we continue to monitor the developments," he said.

The Monetary Board of the BSP has so far met only once this year, on February 11, when it decided to keep policy rates at record lows. The next meeting is scheduled on March 25.

Policy rates by 200 basis points in 2020 — 25 basis points in February; 50 basis points each in March, April, and June; and another 25 basis points in November. — RSJ, GMA News