BSP aims for 2% inflation target
The Bangko Sentral ng Pilipinas (BSP) said it is aiming to bring inflation closer to 2 percent, shifting to a single-point target instead of a target band as early as next year.
BSP Governor Eli Remolona Jr. explained that adopting a single-point target aligns the Philippines with countries like the United States, where a specific inflation rate is preferred for clearer policy guidance.
When asked about a reasonable inflation target for a growing economy like the Philippines, Remolona suggested that around 2 percent would be appropriate.
“Maybe 2 percent is good enough. We don’t know. We’re crunching the numbers. We’re doing our own homework,” he told reporters during a roundtable discussion last week.
He explained why a zero percent inflation target is unpreferable for a growing economy like the Philippines. “
“The reason it’s not zero is because in a growing economy, you have to allow relative prices to change. And when you allow relative prices to change, they tend to be sticky downwards,” Remolona said.
“So, allowing them to change means some inflation. And so, it constrains the economy if you have too low a target,” he said further.
Inflation slowed to 1.4 percent in April, down from 1.8 percent in March, largely due to slower increases in food prices and reduced transport costs.
The April figure came in lower than the 1.9 percent median forecast from the latest Inquirer survey of 10 economists conducted during the last week of the month.
The rate fell within the central bank’s projected range of 1.3 to 2.1 percent for the period.
