Inflation eased to a 15-month low of 3.3 percent in March after peaking at 6.7 percent in September and October last year amid the steady decline in food prices.
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Inflation remains a threat — BSP
Lawrence Agcaoili (The Philippine Star) - April 22, 2019 - 12:00am

MANILA, Philippines — Inflation remains a threat as expectations remain close to the upper end of the government’s two to four percent target, according to the Bangko Sentral ng Pilipinas.

BSP Deputy Governor Diwa Guinigundo said inflation averaged 3.8 percent in the first three months of the year after a steady decline for the past five months.

Inflation eased to a 15-month low of 3.3 percent in March after peaking at 6.7 percent in September and October last year amid the steady decline in food prices.

“I hope banks and market analysts will be able to enhance their assessment before they ask the BSP to immediately ease the monetary policy when the January to March 2019 inflation at 3.8 percent has barely found itself in the target groove again. Inflation expectations are still close to the upper end of the target,” Guinigundo said.

Economists and analysts have been expecting the central bank’s Monetary Board to reverse its tightening cycle amid the steady inflation downtrend.

Inflation accelerated to 5.2 percent last year from 2.9 percent in 2017 and exceeded the BSP’s two to four percent target range due to elevated oil and food prices as well as weak peso.

The BSP raised interest rates by 175 basis points in five rate-setting meetings from May to November wto prevent inflation from spiralling out of control. The government also adopted several non-monetary measures including the enactment of the rice tariffication law.

Credit growth has been slowing down due to softer demand from retail and corporate borrowers after the series of rate hikes by the BSP last year to keep inflation expectations well anchored.

Latest data showed the increase in bank lending eased further to 13.7 percent in February as disbursements by banks reached P8.2 trillion from P7.22 trillion in the same month last year.

Likewise, the increase in liquidity or money supply (M3) eased to 7.1 percent with P11.5 trillion in February.

Easing inflation has allowed the BSP to take a breather from its tightening episode by keeping interest rates steady in three straight rate-setting meetings from December to March.

The next rate – setting meeting of the BSP is scheduled on May 9.

Aside from rate cuts, economists and analysts expect the BSP to resume the reduction of the level of deposits banks are required to keep with the central bank or reserve requirement ratio.

Economic managers through the Development Budget Coordination Committee (DBCC) slashed the projected gross domestic product (GDP) growth to a range of six to seven percent instead of the previous seven to eight percent due to external risks including the trade war between the US and China as well as the delay in the passage of the country’s 2019 national budget.

FOOD PRICES INFLATION
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