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By Lee C. Chipongian
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno expects inflation to be lower in April after the government reported 2.5 percent inflation in March.
File photo MB.
The inflation rate slowed in March from 2.6 percent in February.
Diokno said Tuesday that inflation in April “is likely to be even lower.” He said inflation will drop further due to the “collapse of world oil prices, the freezing of basic needs prices (and the) zero or nearly zero increase in public services.”
The BSP said world crude oil prices are consistent with the latest futures market data and the latest assessment by international energy agencies on the prospects for the world oil market. The sharp drop in oil prices is due to expectations of lower world demand and the consequences of the consequences between Saudi Arabia and Russia.
Regarding the impact of the improvement of the community quarantine on inflation, the BSP said that the COVID-19 outbreak will have a negative impact on manufacturing and world trade, and that the quarantine measures to contain will decrease domestic demand, thus contributing to the reduction of inflationary pressures in the future. months.
The BSP had forecast a range of two percent to 2.8 percent for inflation in March. The last time the rate was 2.5 percent was in December 2019. It rose to 2.9 percent in January this year before falling to 2.6 percent in February.
In a separate statement, the BSP said the latest inflation result remains consistent with its assessment. “Inflation is expected to be benign on the policy horizon due to the possible adverse impact of COVID-19 on the national and global economic environment,” said the BSP.
The central bank reiterated that the balance of risks to the inflation outlook is still tilting downward for both 2020 and 2021.
“Uncertainty about the strength and duration of the pandemic poses significant downside risks to aggregate demand,” said the BSP.
At its last Monetary Board policy meeting, which took place on March 19, amid the blockade of COVID-19, the Monetary Board noted that while applying quarantine measures could help curb the spread of the virus, the resulting disruptions in industries and the private sector. Spending is likely to reduce economic growth in the short term.
The BSP cut rates by 50 basis points (bps) that day, bringing the total reduction this year to 75 bps. The first 25 bp rate cut was on February 6.
“COVID-19 has diminished the outlook for the world economy, which could negatively affect tourism, trade, Philippine remittances abroad and foreign investment,” said the BSP, explaining why the Monetary Board chose to reduce the rate another 50 bp last month.
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