Further monetary policy action is likely as inflation expectations remain elevated, a Bangko Sentral ng Pilipinas (BSP) official said on Friday.
“On the basis of the new information in the third quarter of 2018, a strong follow-through is necessary…,” central bank Department of Economic Research officer-in-charge Dennis Bautista said in a press briefing, citing the central bank’s assessment in its third quarter inflation report.
Rising food and energy prices continued to drive inflation higher in the third quarter to 6.2 percent.
In the report, the central bank said that its latest charts showed an upward shift in the inflation projection for 2018-2019, which can be attributed mainly to a sharp rise in global crude oil prices, higher prices of domestic food items, higher-than-expected inflation outturns for July and August 2018, and the peso’s depreciation.
“The BSP’s latest baseline forecasts using the 2012-based CPI (consumer price index) series show that average inflation is likely to exceed the upper end of the target range in 2018 and may do so in 2019, even as inflation is expected to revert to within the target in 2020,” the central bank said in a statement.
“However, the implementation of non-monetary mitigating measures, particularly the approval of rice tariffication, could temper further price pressures and thus lead to an earlier return of inflation to within the target range in 2019. Meanwhile, inflation expectations have also remained elevated amid indications of second-round effects,” it added.
Monetary authorities have raised key interest rates by a total of 150 basis points beginning May as inflation exceeded the 2.0-4.0 target, hitting a new nine-year high of 6.7 percent in September.