The March 2021 inflation of 4.5 percent was within the BSP’s forecast range of 4.2-5.0 percent. The overall latest outturn is consistent with expectations that inflation could settle above the high end of the target in 2021, reflecting the impact of supply side constraints on domestic prices of key food commodities, such as meat, as well as the continuing rise in world oil prices. Nevertheless, inflation is still seen to return to within target band in 2022 as supply side influences subside. At the same time, timely and effective implementation of direct measures by the National Government could contribute to easing price pressures.
The balance of risks to inflation outlook remains broadly balanced around the baseline path in 2021, while leaning toward the downside in 2022. Tighter domestic supply of meat products and improved global economic activity could lend further upward pressures on inflation. However, ongoing pandemic also continues to pose downside risks to the inflation outlook, as the recent surge in virus infections and challenges over mass vaccination programs continue to temper prospects for domestic demand.
The Monetary Board is of the view that prevailing monetary policy settings remain appropriate to support the Government’s broader efforts to facilitate the recovery of the economy. At the same time, the Monetary Board emphasizes that the timely implementation of non monetary interventions is crucial in mitigating the impact of supply side pressures on inflation and thereby preventing them from spilling over as second round effects.
Looking ahead, the BSP will remain watchful for any signs of inflation becoming broader based. The BSP is prepared to take immediate measures as appropriate to ensure that the monetary policy stance continues to support the BSP’s price and financial stability objectives.(PR)
