Inflation in Q2 ‘not a basis’ for action — central banker
MANILA, Philippines — Inflation in the second quarter is not enough basis for monetary authorities to hike key rates, a central banker said, amid concerns that the Bangko Sentral ng Pilipinas is already behind the curve in policy tightening.
“The inflation for the next three months is not itself a basis for action. For instance, if the inflation for the next three months is temporary, there’s no need for action,” Monetary Board member Felipe Medalla said in a press conference on Tuesday.
“But if the forecast is that inflation will be more... will cover more commodities and will last longer, then that will call for a rethinking of the current policy stance,” Medalla added.
The central bank had repeatedly sought to temper calls for adjustments in benchmark interest rate, saying rising consumer prices stoked by a new tax law that slapped higher excise levies on fuel and cigarettes, among others, is only “temporary.”
But early this month, the central bank said it was evaluating the appropriateness of a “measured policy response” after inflation, based on the 2012 consumer price index series, jumped to a five-year high of 4.3 percent in March.
The BSP also stressed that the economy is sturdy enough to “absorb some policy tightening if warranted.”
"If we do something because we are expected to do so despite the fact that we don’t think so, that doesn’t make us behind the curve," Medalla said.
Inflation in the first quarter of 2018 averaged 3.8 percent, near the top end of the government’s 2-4 percent target band. The BSP projects inflation to hit 3.9 percent this year and moderate to 3 percent in 2019.
Meanwhile, analysts at First Metro Investment Corp. and the University of Asia & the Pacific expect the Monetary Board to raise policy rates by 25 basis points in the second quarter, “with inflation breaching the 4 percent upper limit of the BSP target.”
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