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MANILA, Philippines – The pace of price increases in the Philippine economy will likely remain quiet in the short term due to weak demand both domestically and abroad due to the lingering economic effects of the coronavirus pandemic, according to the central bank.
Bangko Sentral ng Pilipinas Governor Benjamin Diokno released this assessment to journalists on Thursday after the latest government data showed a slight spike in October’s inflation rate to 2.5 percent from 2.3 percent of the previous month.
“October 2020 inflation was within the BSP forecast range of 1.9 to 2.7 percent,” the central bank chief said. “The most recent inflation result is consistent with the prevailing BSP assessment of favorable inflation dynamics over the policy horizon.”
“The balance of risks continues to tilt downward due in large part to the impact on national and global economic activity of potential deeper economic shocks caused by the pandemic,” Diokno explained.
The resulting 2.5 percent annual average inflation rate to date remained within the government’s target range of 3 percent, plus or minus 1 percentage point for the year.
By contrast, core inflation, which excludes certain volatile food and energy to measure core price pressures, fell to 3 percent year-on-year in October from 3.2 percent in September.
The government said higher headline inflation was mainly due to faster increases in the prices of certain foods. Meat inflation rose as pork prices rose due to supply shortages caused by African swine fever. At the same time, fish inflation also increased due to adverse weather conditions limiting fish supplies.
Given these developments, Diokno said that the Monetary Board will consider the most recent inflation result along with the forthcoming release of third-quarter gross domestic product data in its assessment of the inflation and economic activity outlook for the establishment meeting of group interest rates in November. 19.
“The BSP is ready to implement all measures available in its toolkit in fulfillment of its policy mandate while continuing to assess the impact of the global health crisis on the national economy,” he said.
ING Bank Manila Senior Economist Nicholas Mapa pointed to Diokno’s earlier statement that he will likely keep interest rates unchanged over the course of the next two quarters with real policy rates now negative at -0.25 percent, and after implementing a series of aggressive rate cuts previously. this year.
“We anticipate a [rate cut] pause from BSP until well into 2021, ”he said. “We expect inflation to settle at 2.4 percent for the year as anemic domestic demand will keep price gains at bay with BSP’s content of providing liquidity support through its bond purchase program. to help stimulate recovery.
/ MUF
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