BSP considers lower inflation target for 2002

The Bangko Sentral ng Pilipinas (BSP) may bring down this year’s inflation target to four to five percent, a notch lower than the original projection of five to six percent, BSP Governor Rafael Buenaventura said yesterday.

Buenaventura said there are several factors that favor a downward revision of the full-year inflation target.

These include stable food prices and supply as well as the lower-than-anticipated prices of oil products in the world market.

Last week, the country’s economic team said it will review this year’s inflation target of five to six percent after the first quarter.

In a recent economic briefing, Budget Secretary Emilia Boncodin who chairs the interagency Development Budget Coordinating Council (DBCC) said the review is significant because any revision or adjustment in the inflation numbers will mean similar revisions in other key macroeconomic targets such as the gross domestic product (GDP) and the 91-day Treasury bill rate.

Earlier, BSP deputy governor Amando Tentangco Jr. said a downscaling of the inflation target will force the central bank to review its monetary policy.

Last week, the benign inflation outlook prompted the Monetary Board (MB), the policymaking body of the BSP, to cut its key policy rates at by 25 basis points.

The central bank’s new overnight borrowing and lending rate are at 7:25 percent and 9.5 percent, respectively.

In a previous interview, Socioeconomic Planning Secretary Dante Canlas said government can consider readjusting downward its full-year inflation target from five to six percent to four to five percent.

Canlas said inflation is expected to be more benign than originally forecast because of expectation that food prices will remain stable while crude prices could further soften.