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Inflation to taper off by 2nd half — BSP

A BusinessWorld poll of 16 analysts yielded a median estimate of 4.8% for February inflation, near the upper end of the central bank’s 4.3% to 5.1% estimate. — PHILIPPINE STAR/MICHAEL VARCAS

HEADLINE INFLATION will likely ease to within the target range by the second half, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said on Thursday, adding that monetary policy response would not be needed as risks arise from the supply side.

“We recognize that the factors explaining the elevated inflation is not due to the demand side but on the supply side — the rising oil prices, the rise in some food prices because of some factors. And so, we thought it does not require monetary response,” he said at a briefing.

“It would be beyond our 2-4% forecast for the first half of the year, but we are confident that it will taper off in the second half of the year,” he added.

Inflation spiked to a two-year high of 4.2% in January due to elevated oil and food prices.

A BusinessWorld poll of 16 analysts last week yielded a median estimate of 4.8% for February inflation, near the upper end of the central bank’s 4.3% to 5.1% estimate due to the continued increase in prices of oil and some food items.

Official February inflation data are scheduled to be released today.

The country is under a negative real interest environment with the key policy rate at 2% and January inflation at 4.2%.

The Monetary Board at its first meeting on Feb. 11 kept key policy rates untouched. Mr. Diokno has also said they would remain accommodative and hinted that discussions on a rate hike is “too early” for now.

“Monetary policy works with a lag and we cannot influence inflation over the near term. It’s the direct measures that will be able to do that,” BSP Department of Economic Research Senior Director Zeno R. Abenoja said.

He said the central bank supports nonmonetary measures that have been imposed to bring down commodity prices, such as price caps on pork and chicken products.

“Effective implementation of these nonmonetary measures should help anchor inflation expectations over the near term,” Mr. Abenoja said.

The central bank expects inflation to average 4% this year, much quicker than 2.6% in 2019. By 2022, they expect average inflation to ease at 2.7%.

Mr. Diokno said they continue to monitor developments related to higher inflation to gauge their monetary actions.

“For example, if this inflation is followed by increased demand and an event of higher wage rate, that is a concern,” he said.

The Monetary Board will holdits rate-setting meeting on Mar. 25. — Luz Wendy T. Noble

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