BSP remains confident of within target 2015 inflation rate

Bangko Sentral ng Pilipinas (Central Bank of the Philippines). Wikipedia photo

MANILA — Drop in the rate of price increases in January 2015 to 2.4 percent from month-ago’s 2.7 percent made the Bangko Sentralng Pilipinas (BSP) more secure of its within-target inflation outlook for the year.

The actual inflation rate in the first month this year is within the central bank’s 1.8-2.7 percent forecast for the month.

Similarly, core inflation, which excludes volatile oil and food items, slightly went down to 2.2 percent from month-ago’s 2.3 percent.

In an SMS to reporters, BSP Governor Amando Tetangco Jr. attributed the sustained drop in the country’s inflation rate to slower movement in the prices of utilities, gas and transport indices.

”It falls within our forecast range and bolters our view of within-target inflation over our policy horizon,” he said referring to the two to four percent inflation target for this year until 2018.

”We will continue to monitor developments particularly in international oil prices and their impact on financial market volatilities and inflation expectations to see if there is need to make adjustments to our policy levers,” he added.

Inflation is not a worry for Philippine monetary officials anymore unlike in 2014 when it almost breached the three to five percent target of the government after hitting 4.9 percent in July and August.

However, it has gone down starting last September due to series of policy measures including the 50 basis points cut in the interest rate of the central bank’s key rates and special deposit account facility as well as banks’ reserve requirments.

To date, rate of the BSP’s overnight borrowing or reverse repurchase (RRP) facility is at four percent, the overnight lending or repurchase (RP) facility is at six percent and the SDA rate is at 2.5 percent.

Relatively, the hike in reserve requirements last year brought the reserve requirements for universal and commercial banks (U/KBs) to 20 percent while it is eight percent for thrift banks (TBs).

With these policy measures, inflation averaged at 4.1 percent in 2014.