BSP: Despite risks, 2 to 4% inflation goal stays
BSP Governor Benjamin Diokno said the balance of risks to the inflation outlook continues to lean slightly toward the upside in 2020 and toward the downside in 2021.
Geremy Pintolo/ File
BSP: Despite risks, 2 to 4% inflation goal stays
Lawrence Agcaoili (The Philippine Star) - January 25, 2020 - 12:00am

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is confident inflation will stay within the target range of two to four percent over the next two years despite the volatility in global oil prices as well as the impact of recent weather disturbances and natural hazards on domestic food prices.

BSP Governor Benjamin Diokno said the balance of risks to the inflation outlook continues to lean slightly toward the upside in 2020 and toward the downside in 2021.

Diokno said the favorable inflation environment gave the BSP scope for a further reduction in the reserve requirement ratios for banks and quasi banks last year.

As part of the BSP commitment to lower banks’ reserve requirement to single digit by 2023, the BSP slashed the reserve requirement ratio or RRR for big and mid-sized banks by 400 basis points and for small banks by 200 basis points last year.

“This is in line with the BSP’s broad financial sector reform agenda to promote a more efficient financial system by lowering financial intermediation costs,” the BSP chief said.

Dennis Lapid, Monetary Policy sub-sector officer-in-charge, said in a press conference inflation expectations remain firmly within the inflation target range.

Lapid said the upside risks to inflation over the near term emanate mainly from potential volatility in global oil prices amid geopolitical tensions in the Middle East as well as potential impact of recent weather disturbances and natural hazards on domestic food prices.

On the other hand, downside risks include uncertainty over trade policies in major economies continue to weigh down on global economic activity.

BSP Deputy Governor Francisco Dakila Jr. said the Monetary Board would consider several factors including the gross domestic product (GDP) growth in the fourth quarter as well as the inflation in January when it decides on the country’s monetary policy stance on Feb. 6.

The Philippines recorded a GDP growth of 5.9 percent last year, missing the lower end of the revised six to 6.5 percent target due to the delayed passage of the 2019 national budget.

“The board will be looking at several key data points that are available including the fourth quarter GDP result, which is quite favorable. It brings us back quite close to the lower-end of the government target. And it puts us in a more comfortable position with respect to the target growth for 2020,” Dakila said.

BENJAMIN DIOKNO BSP
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