2005 inflation may exceed target, says BSP official

The Bangko Sentral ng Pilipinas (BSP) said yesterday it expects inflation this year to track the upper end of the government’s four to five-percent target range, while next year it is expected to exceed the target – which is at the same level – due to higher prices of oil and food.

BSP Assistant Governor, Diwa Guinigundo, said the consumer price index (CPI) is forecast to rise 5.2 to 5.86 percent next year.

Still, the Development Budget and Coordinating Committee (DBCC) has decided to keep the four- to five-percent inflation target for 2005, he added.

The DBCC has forecast a GDP growth of 5.3 to 6.3 percent next year, Guinigundo added.

The CPI continues to rise, averaging at 4.6 percent in the second quarter, due to higher food costs.

As in the previous quarter, the rise in inflation was primarily supply-side driven, linked to movements in the prices of specific food items, particularly meat products.

Average headline inflation for the first semester was 4.1 percent, which is at the lower end of the government target of four to five percent for the year.

The central bank said current conditions do not warrant a tightening in monetary policy, saying the CPI increase was largely due to supply-side or cost-push factors, which it deems as transitory.