Philippines: BSP digging deeper into inflation toolbox

  • The Bangko Sentral ng Pilipinas (BSP) needs to dig deeper into its ‘toolbox’ as inflation raced above 6% for the first time in more than nine years to hit 6.4% in Aug 18, fueling calls for aggressive monetary action later in Sep 18.
  • Based on its latest assessment, the BSP expects inflation to average 4.9% in 2018, 3.7% in 2019 and 3.2% in 2020.
  • “An unfortunate confluence of cost-push factors continues to drive consumer price inflation in August beyond the acceptable target range,” BSP Governor Nestor Espenilla Jr. said.
  • The BSP is pursuing carefully coordinated efforts with other government agencies in implementing non-monetary measures to further mitigate the impact of supply-side factors on inflation.
  • Economic managers have been pushing for the amendments to Republic Act 8178 otherwise known as the Agricultural Tariffication Act of 1996 that could reduce inflation by 0.2% in 2018 and 0.6% if passed and implemented within 4Q18.
  • The BSP chief also cited the weak peso brought by emerging market uncertainties as well as the elevated oil prices that continue to impact transport and power prices.
  • “These are adding to the cost-push pressures. However, it is equally apparent that strong domestic demand is making it too convenient for producers and traders to pass on higher costs and possibly more to consumers,” Espenilla said.
  • Monetary authorities, Espenilla said, would be looking more closely at the latest data to reassess the medium-term inflation path.

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