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The rate of increase in prices of basic goods and services in the country will likely remain within forecasts for the foreseeable future, as confirmed by the latest data, according to the central bank.
In a statement, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said December 2020 inflation of 3.5 percent was within the monetary regulator’s forecast range of 2.9 to 3.7 percent. hundred.
The most recent inflation result brings average annual inflation for 2020 to 2.6 percent, which is within the national government’s target of 3 percent, plus or minus 1 percentage point.
“The BSP continues to expect inflation to settle within the target range over the policy horizon,” the central bank chief said.
Diokno said the recent upward trend in inflation was considered “largely transitory,” reflecting the short-term impact of the weather shocks.
Central bank planners believe that the overall balance of risks for future inflation continues to tilt downward mainly due to the continued uncertainty caused by the pandemic in domestic and global economic activity.
Nonetheless, the upside risks emanate from the possibility of an early deployment of COVID-19 vaccines in the Philippines, which is expected to ease existing lockdown measures and further expand the operational capacity of the economy.
At the same time, a stronger-than-expected global economic recovery as the vaccine is increasingly deployed in key economies abroad could put upward pressures on world oil and food prices.
“The BSP stands ready to deploy its full arsenal of instruments as needed in fulfillment of its mandate to maintain financial and price stability leading to sustainable economic growth,” Diokno said.
Last December, Diokno said that the monetary planner’s economists expected the official inflation rate for the final month of 2020 to settle within the 2.9-3.7 percent range.
The resulting real rate of 3.5 percent was higher than the November inflation rate of 3.3 percent, which exceeded the central bank’s previous forecast range of 2.4-3.2 percent, a phenomenon that authorities described as “transitory.” .
“Higher prices for domestic petroleum products and key agricultural items contributed to upward price pressures during the month,” the BSP chief said, adding that these factors could be partially offset by the downward adjustment of electricity rates in the areas served by Meralco, along with lower rice prices and the continued appreciation of the peso.
Last November, the central bank implemented a surprising 25 basis point rate cut, further lowering its key interest rate to a record low of 2 percent.
With the rise in the inflation rate in November, the resulting negative real interest rate now stands at 1.3 percent, representing the net erosion of the purchasing power of the peso. INQ
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