The Bangko Sentral ng Pilipinas (BSP) remains vigilant of evolving global and domestic price conditions and stands ready to deploy appropriate monetary policy tools necessary to safeguard its price and financial stability objectives.
Equally important, the BSP supports direct supply-side measures to address the main source of supply constraints and bottlenecks.
“The BSP stands ready to maintain its accommodative monetary policy stance for as long as necessary to support the economy’s recovery amid the adverse impact of the COVID-19 pandemic. The BSP is likewise prepared to utilize available policy space to ensure that monetary policy settings are in line with sustainable recovery of the economy, consistent with its price and financial stability mandates,” said BSP Governor Benjamin E. Diokno.
Global inflation has picked up in 2021 but the nature of recent price pressures is largely transitory. The recent rise in global inflation is largely influenced by pandemic-induced changes in spending patterns, increased commodity prices, temporary demand-pull price pressures, and base effects.
Commodity prices could remain elevated in the coming months, but are likely to remain benign over the medium term. The latest forecasts from the International Monetary Fund (IMF), US Energy Information Administration, and Oxford Economics, which continue to indicate that oil prices could be lower in 2022, remain within Development Budget Coordination Committee assumptions for 2021 and 2022.
Similarly, global non-fuel prices have increased further in 2021 as the world economy recovers from the pandemic, but are showing signs of moderation from their peak levels in Q2 2021.
Despite the recent uptick in global inflation, there is limited evidence suggesting that the rise in inflation would be persistent.
“We agree with the assessment of the IMF that inflation could return to its pre-pandemic ranges in most countries in 2022. However, caution should be exercised to ensure that temporary price pressures do not become fully entrenched in the domestic price dynamics,” according to the Governor.
The BSP considers global commodity prices and their impact on domestic inflation outlook in its regular assessment of inflation dynamics and in formulating the monetary policy stance. The Philippines is affected by significant fluctuations in global commodity prices.
Given the relative importance of food and energy items in the consumer price index basket, the developments in these sectors along with potential signs of second-round effects, including changes in inflation expectations, are important considerations in the formulation of monetary policy at the BSP.
Increased global crude oil and non-oil commodity prices contributed to higher baseline inflation forecast for 2021. The latest baseline forecasts indicate that inflation could settle close to the high-end of government’s target range of 3.0 percent ± 1.0 ppt for 2021 at 4.1 percent and close to the midpoint of the target at 3.1 percent for 2022 and 3.1 percent for 2023.
Moreover, the possible further uptick in global commodity prices due to strong global demand amid supply chain bottlenecks could pose upside risks to inflation in the near term. (BSP) -rir
