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April 12, 2024

BSP: Monetary policy to remain tight despite low January inflation

The Bangko Sentral ng Pilipinas (BSP) will maintain its tight monetary policy stance despite inflation falling to a three-year low of 2.8% in January 2024, according to a statement released on Monday.

“Looking ahead, the Monetary Board deems it necessary to keep monetary policy settings sufficiently tight until a sustained downtrend in inflation becomes evident. The BSP will consider the latest inflation and GDP outturns for the Monetary Board’s policy meeting on 15 February 2024,” the BSP said in a statement following the release of the January 2024 inflation report.

The Philippine Statistics Authority (PSA) reported that inflation dipped to 2.8 percent, the slowest since the 2.3 percent inflation rate registered in October 2020.

It was also lower than 3.9 percent in December 2023 and 8.7 percent in the same month last year.

The BSP said it was also within its forecast range of 2.8 to 3.6 percent for the month.

“This inflation outturn is consistent with the BSP expectations that inflation will likely moderate in first quarter of 2024 due to largely to negative base effects and some easing of supply constraints affecting key commodities. However, inflation could temporarily accelerate above the target range from Q2 2024 due to the impacts of El Niño weather conditions and positive base effects,” it said.

The BSP said the balance of risks to the inflation outlook still leans significantly towards the upside.

Upside risks to the inflation outlook remain substantial, primarily due to potential pressures from higher transportation charges, electricity rates, oil prices, and food costs linked to El Niño conditions, the BSP noted. These pressures could be partially offset by a weak global recovery and government measures mitigating El Niño’s effects.

National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan said the Inter-Agency Committee on Inflation and Market Outlook (IAC-IMO) would continue to closely monitor the prices of rice and other goods to provide the President and the Cabinet with timely and appropriate policy recommendations and ensure stable and affordable prices of commodities.

Balisacan said with the El Niño lingering until May, “we introduce stop-gap measures, as necessary, such as allowing further imports on key commodities until our supply stabilizes at prices affordable to consumers while ensuring remunerative prices for local producers.”

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