Philippines

BSP keeps ’17-’18 inflation forecast at 3.2%, hikes ’19 to 3.2%

MANILA (Philippines News Agency) – – Bangko Sentral ng Pilipinas’ (BSP) policy-making Monetary Board (MB) on Thursday maintained the central bank’s 2017-18 inflation projection but slightly hiked the 2019 figure given the developments in oil prices and weakness of the peso, among others.

In a briefing, BSP Deputy Governor Diwa Guinigundo said the 2017-18 forecasts remain at 3.2 percent while the 2019 projection was increased to 3.2 percent from 3.1 percent last August.

Four factors were identified namely the depreciation of the peso, possible increase in oil prices due to the impact of Hurricane Harvey, production outages in Libya and possible extension of production cut by members of the Organization of the Petroleum Exporting Countries (OPEC) beyond March 2018.

Also, the robust growth of domestic liquidity, which continues to be boosted by domestic demand, and the PHP21 adjustment of minimum wage of workers in Metro Manila from PHP491 to PHP512 effective end-September this year.

“We need to consider that for the forecast of inflation for the next three years,” Guinigundo said.

The central bank official explained that monetary officials will also consider the continued growth story of the domestic economy for the monthly inflation path in the second half of the year.

“Of course by the time we hit 2018, we are expecting some negative base effects,” he said, citing the possible higher inflation rate given the impact of a possible La Nina, which has given a 50 percent probability rate, starting this September until March next year.

“(It’s) another possible factor that could drive action on inflation moving forward, particularly on the supply side,” he said.

Meanwhile, Guinigundo said the Federal Reserve’s decision to keep key rates steady after its two-day meeting on Sept. 19-20 and the possible unwinding of stimulus package will have little impact on the Philippine economy.

“If the balance sheet adjustment is the preferred mode of the US Fed I think it will be gradual…and the impact on us will not be very significant,” he added. (PNA)

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