BSP meeting to focus on price pressures, global dev’ts

MANILA, Philippines - Price pressures and global developments seen affecting domestic inflation will be the main considerations when monetary authorities revisit policy settings today (Thursday).

Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. told reporters yesterday the policymaking Monetary Board will be looking at a number of issues affecting inflation, as well as domestic liquidity and the economy in general.

“We’d like to see the extent of the brewing pressures that we have seen lately on inflation. Since these are supply-side factors, we’d like to assess the potential second-round effects that can come out from these price pressures,” Tetangco said.

These price pressures include the rising food prices, the recent transport fare hikes, climbing power rates, and also the possible wage increase.

Another point of discussion would be the impact of the Monetary Board’s recent two-percent hike in banks’ reserve requirement meant to mop up excess liquidity in the system.

“What we’re looking at is that the growth of liquidity does not in the future cause pressures that can lead to issues on financial stability as well as potential inflationary pressures coming from the demand side,” Tetangco explained.

Developments in the global economy will also be among those that will be tackled and their subsequent impact on domestic inflation and the Philippine economy as well.

Tetangco said the US Federal Reserve’s tapering of stimulus will be considered as this has implications on financial market volatility, as well as the slowdown of the economic growth in China and its impact on global commodity prices.

The central bank will also be watchful of the geopolitical tensions in Iraq as this may eventually affect global oil prices.

“We will consider all these things consistent with the approach under the inflation-targeting framework… We would try to form a view as to the path of future inflation and how these will likely be affected by all of these things,” Tetangco said.

The BSP forecast inflation to average 4.3 percent this year, above the midpoint of the three to five percent target range.

“Given the pressures, I would think that there would be an upward adjustment in the inflation forecast … but the general view is that inflation will still remain within the target range but closer to the upper end of the range,” Tetangco noted.