TRAIN impact on inflation ‘more or less as expected’ — BSP chief

Espenilla said “the first round price effects of TRAIN and other factors such as oil prices are evolving more or less as expected.” (Photo By Bangko Sentral ng Pilipinas, CC BY-SA 4.0)

MANILA — Impact of the first tax reform package on inflation is “more or less as expected” but Bangko Sentral ng Pilipinas (BSP) officials continue to monitor developments to be able to make the necessary adjustments if needed.

The central bank’s policy-making Monetary Board (MB) will have its first rate setting meet on Feb. 8.

BSP Governor Nestor A. Espenilla Jr. said they continued to gather information to update themselves after their meeting last December.

“We have been updating the data and evaluating various price surveys to gain insight on the overall impact on the inflation outlook.  This is an intensely data-driven exercise,” he told reporters Thursday.

The first package of the Tax Reform for Acceleration and Inclusion (TRAIN) law, which cuts workers’ taxes and gives their first PHP250,000 annual income tax free rate, took effect on Jan. 1.

Its impact on revenues was, in turn, countered by the hike in excise taxes on oil products and sugar-sweetened beverages.

Espenilla said “the first round price effects of TRAIN and other factors such as oil prices are evolving more or less as expected.”

“We continue to see the upward inflationary effects as transitory,” he said.

The central bank chief, on the other hand, said that monetary officials “are carefully assessing next round effects and how inflation expectations could be affected.”

“These considerations will be at the center of the coming policy discussions.  The ability to meet the inflation target comfortably and mitigating the upside risks is very important to the BSP,” he added.

The central bank has set the inflation target for 2017-19 between a range of two and 4 percent.

In 2017, inflation averaged at 3.2 percent. Monetary officials have projected a 3.4 percent average inflation this year, higher than last year’s level due to the impact of higher oil prices.

However, the 2019 average inflation projection is lower at 3.2 percent. (PNA)