INFLATION for the month of April may go below 2 percent, the low point of the government’s full-year inflation target range of between 2 and 4 percent, according to Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno.
“The BSP Department of Economic Research projects April 2020 inflation to fall within the 1.9 to 2.7 percent range,” Diokno said.
Inflation in March was at 2.5 percent. Official figures will be released next week.
Diokno said the collapse in oil prices is expected to moderate inflationary pressure coming from higher prices of rice and other food items along with upward adjustment in electricity rates in Meralco-serviced areas.
“The progressive fall in inflation will continue. Looking ahead, BSP will remain watchful of economic and financial developments here and abroad to ensure that monetary policy settings remain consistent with price stability conducive to a balanced and sustainable economic growth,” Diokno said.
In an off-cycle move, the Monetary Board last month decided to reduce the key rates of the BSP by another 50 basis points (bps) to help insulate the economy from the effects of the coronavirus disease 2019 (COVID-19).
Central banks lower interest rates to encourage borrowing and investing, thereby possibly stimulating economic growth. But this may hasten inflation.
Rates are raised, meanwhile, when there is too much growth. Higher borrowing rates slow inflation and return growth to more sustainable levels.
The tweaks came less than a month after the Monetary Board also reduced the key rates by 50 bps. Since Luzon was placed under enhanced community quarantine last month, the key rates have been reduced by 125 bps.
The Monetary Board, the policymaking body of the BSP, has also reduced the reserve requirement ratios of universal and commercial banks as well as non-bank financial institutions with quasi-banking functions by 200 bps; suspended the term deposit facility auctions for certain tenors; reduced the term spread on the peso rediscounting loans relative to the overnight lending rate to zero; and relaxed various regulations pertaining to compliance reporting, calculation of penalties on required reserves, and single borrower limits.
The moves are all meant to help the economy combat the negative effects of COVID-19.
