MANILA - Monetary authorities on Thursday kept the Bangko Sentral ng Pilipinas' (BSP) key rates steady but hiked the projected average inflation rate until 2023.
In a briefing streamed through the central bank's Facebook page, BSP Governor Benjamin Diokno said risks to the inflation outlook this year have tilted on the upside but remain broadly balanced for the next two years, with the former due to the impact of higher commodity prices caused by supply-side factors.
Diokno said upticks in commodity prices in the international market partly due to improving demand and lingering supply-chain bottlenecks in the domestic front caused by weather disturbances and the African swine fever (ASF) provide the upside risks to the inflation outlook.
These factors, however, are expected to be countered by the rise of coronavirus disease 2019 (Covid-19) infections because of the more contagious Delta variant, he said.
"The Monetary Board also noted that the outlook for recovery continues to hinge on timely measures to prevent deeper negative effects on the Philippine economy. To this end, the acceleration of the government's vaccination program and a recalibration of existing quarantine protocols will be crucial in supporting economic activity while safeguarding public health and welfare," he added.
Diokno said the Board has reiterated that together with appropriate fiscal and health interventions, "keeping a steady hand on the BSP's policy levers will allow the momentum of economic recovery to gain more traction by helping boost domestic demand and market confidence."
"Going forward, the BSP will continue to closely monitor evolving conditions for any threats to the inflation target. The BSP stands ready to take appropriate measures as necessary to ensure that the monetary policy stance remains in line with its price and financial stability mandates," he said.
During the same briefing, BSP Deputy Governor Francisco Dakila Jr. said average forecasts for this year until 2023 have been revised upwards to 4.4 percent, 3.3 percent, and 3.2 percent, respectively.
These were previously at 4.1 percent for 2021, 3.1 percent for 2022, and 3.1 percent for 2023.
Dakila attributed these changes to the impact of higher-than-expected inflation last August at 4.9 percent, which accelerated to its fastest since the 4.4 percent in January 2019, the upticks in basic and prime commodities prices, and the lower-than-expected arrival of imported pork.
He said the inflation path is expected to rise above the government's 2 percent to 4-percent target band until October this year before going back to within-target levels by November.
He said the inflation forecasts until 2023 "are really quite manageable since inflation pressures are really short term and emanate from the supply side."
"As previous episodes of supply-side shocks in the country have shown, supply-side shocks tend to be best addressed through non-monetary policy interventions that could ease domestic supply," he added. (PNA)