The central bank expects price pressures to ease in April and let inflation settle within the 3.6 percent to 4.5 percent range. But it said it remains watchful of liquidity and credit growth and how they may be affected by global developments.
In a text message to reporters on Tuesday, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said the inflation forecast incorporates both possible upward pressures from rice prices due to the lean season, adjustments in electricity rates, and possible lower prices of other food items during the month.
“Over the policy horizon, inflation is expected to be manageable. Average inflation is seen staying slightly above the mid-point of the target ranges,” Tetangco said.
The BSP is targeting a 3 percent to 5 percent inflation rate in 2014 and 2 percent to 4 percent in 2015. This year, the central bank is expecting a 4.2 percent full-year average inflation.
March inflation settled at 3.9 percent, lower against the February and January rates of 4.1 percent and 4.2 percent, respectively.
First quarter inflation averaged 4.1 percent.
The latest data from the BSP showed growth in domestic liquidity eased slightly to 36.4 percent in February from a year earlier but remained strong at P6.9 trillion on the back of sustained demand for credit from the economy.
Meanwhile, bank lending grew sharply in February as production stepped up with outstanding loans of commercial banks rising by 19.4 percent in February, following a 17.1 percent increase the preceding month.
The BSP decided to keep its policy interest rates steady during its February 3 and March 27 monetary policy meetings, concluding its assessment that the future inflation path was likely to stay within the target for 2014 and 2015.
At the same time, the Monetary Board decided to increase the reserve requirement by one percentage point effective on April 11 to help guard against potential risks to financial stability that could arise from the recent rapid growth in domestic liquidity.
The next monetary board meeting is scheduled for May 8.