Inflation to remain manageable – BSP

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) expects inflation to remain manageable at 3.3 percent this year, a sharp rise from the 1.8 percent average in 2016.

“While inflation is expected to continue to gather momentum in the year ahead, inflationary pressures are seen to remain manageable over the policy horizon given well-contained inflation expectations. The balance of risks surrounding the inflation outlook remains tilted to the upside, owing in part to pending petitions for adjustments in electricity rates and to the initial impact of the national government’s broad fiscal reform program. Lingering uncertainty in global economic prospects, however, continues to pose a key downside risk to the inflation outlook,” BSP Deputy Governor Diwa Guinigundo said in a briefing yesterday.

Inflation is also expected to climb at a faster rate of three percent in 2018.

Guinigundo said the current policy settings remain appropriate.

Last December 22, the BSP kept policy rates steady at 3.5 percent for the overnight lending facility, three percent for the overnight reverse repurchase facility and 2.5 percent for the overnight deposit facility. The BSP also left the reserve requirement ratios unchanged at 20 percent.

Monetary authorities said the economy is expected to be able to absorb external shocks and sustain its growth trajectory, as firm domestic demand conditions, adequate domestic liquidity and credit, and ongoing reforms, including on the fiscal front, continue to provide solid footing for steady expansion.

“Moreover, in the near term, policy settings and the resulting overall monetary conditions remain appropriately supportive of economic activity. At the same time, it provides scope for flexibility in view of continued uncertainty in the global economy as well as the possibility that the US Fed may raise interest rates at a faster pace in 2017. Accordingly, the BSP will continue to monitor domestic and external developments to ensure price and financial stability conducive to sustained economic growth,” the BSP said.

According to BSP data, high-frequency indicators of demand continued to point to firm growth prospects in the near term.