THE Bangko Sentral ng Pilipinas (BSP) yesterday said it sees inflation for March to settle within the 2 to 2.8 percent range with a point inflation projection of 2.4 percent.
This is lower than the February inflation of 2.6 percent and below the midpoint of the government’s target range of between 2 and 4 percent.
Benjamin Diokno, BP governor, said the sharp decline in the prices of petroleum products due to the significant fall in global crude oil prices contributed to the downward price pressures for the month.
As of March 25, the price of Dubai crude was down to $22.51 per barrel. It averaged at $85 per barrel in 2018.
“In addition, the prices of selected food products remained broadly stable in March due to adequate supply and favorable weather conditions along with the price freeze imposed on basic necessities by the Department of Trade and Industry (DTI) and the Department of Agriculture (DA),” Diokno said.
Meanwhile, Diokno said electricity rates in Meralco-serviced areas were slightly higher during the month.
“Going forward, the BSP will continue to monitor economic and financial developments, and stands ready to implement appropriate policies in support of its primary mandate of price stability conducive to balanced and sustainable economic growth,” Diokno stressed.
Price increases of major commodities is expected to slow down further this year as the ongoing health and quarantine measures to contain the coronavirus disease (COVID-19) is expected to dampen domestic demand.
During the last monetary policy stance meeting, the Monetary Board said inflation is projected to average at 2.2 percent for 2020 and 2.4 percent for 2021.
This is lower than the previous forecasts of 3.0 percent for 2020 and 2.9 percent for 2021.
“The COVID-19 outbreak is seen as having a negative impact on global manufacturing and trade, and the ongoing health and quarantine measures to contain it could likely dampen domestic demand, thus contributing to reduced inflation pressures in the coming months,” Diokno said.
Recognizing the negative effects brought by COVID-19 to the Philippine economy, the Monetary Board released a number of monetary tools starting with the reduction of the key rates of the BSP by 50 basis points.
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.
In addition, the Monetary Board authorized the time-bound, temporary relaxation of BSP regulations on compliance reporting by banks, calculation of penalties on required reserves, and single borrower limits.
The Monetary Board also approved a temporary reduction in the term spread on rediscounting loans relative to the overnight lending rate to zero.
Diokno maintained that although inflation expectations remain firmly anchored within the full-year target range of between 2 and 4 percent, he said the decision was meant to combat the negative effects of COVID-19 to the general economy.
