BSP commits to fight broadening price pressures

The Bangko Sentral ng Pilipinas (BSP) has committed its readiness and vowed to do necessary policy actions on the broadening price pressures caused partly by higher oil prices that continue to accelerate domestic inflation rate, to ensure price stability.

This BSP vow was issued after the Philippine Statistics Authority (PSA) reported on Friday that domestic rate of price increases rose further to 6.4% last July, the fourth consecutive month it breached the government’s 2-4% target band, and the highest rate since October 2018.

The average inflation in the first seven months this year stood at 4.7%. Inflation last June stood at 6.1% while it was at 3.7% in   July 2021.

In a statement, the BSP said the inflation print last month is within its 5.6 to 6.4% target range for July and is consistent with its “assessment of elevated price pressures over the near term on firmer indication of second-round effects.”

It said emerging second round effects like hikes in minimum wages and transport fares due largely to the elevated global oil and commodity prices, and the rising inflation expectations broaden price pressures.

The BSP said risks are coming from the impact of the Russian-Ukraine conflict on prices of non-oil commodities in the international market, as well as the potential second-round impact of elevated oil prices on prices of goods and services, adding that “domestic food prices also pose upside risks due to shortages in the supply of several key food items.”

The BSP said “a slower-than-expected global recovery due to tighter global monetary policy conditions and the continued uncertainty from the Covid-19 pandemic continues to present a downside risk to the outlook.”

The BSP thus ensures its bid to “take all necessary policy action to bring inflation toward a target-consistent path over the medium term and deliver on its primary mandate of price stability.”

It said the total of 125 basis points increase in the central bank’s key rates since last May “should help moderate inflation expectations.”

“At the same time, the BSP reiterates its support for the carefully coordinated efforts of other government agencies in implementing non-monetary interventions to mitigate the impact of persistent supply-side factors on inflation,” it added. .

The statement said the central bank’s policy-making Monetary Board (MB) “will review its assessment of the inflation outlook along with the latest GDP (gross domestic product) outturn in its monetary policy meeting on 18 August 2022.”

The BSP’s average inflation forecast for this year is 5%, higher than the target band due largely to elevated prices of oil and non-oil commodities in the international markets, and supply constrains for several food items in the country. (With PNA)