‘BSP may avoid further tightening’

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The easing of inflation in September may provide the central bank some slack in its monetary policy and will also allow the economy to regain its pace in the second half
of the year, a government economist said on Thursday.

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Headline inflation slowed to a year-on-year rate of 4.4 percent in September, down from 4.9 percent in August, with food inflation decelerating, the Manila Times reported earlier.

“The economy successfully reversed inflationary expectations through a decisive reduction in food inflation in September,” Gil Beltran, Department of Finance (DOF) undersecretary and chief economist said in a statement.

Beltran said, “this favorable development may enable the Bangko Sentral ng Pilipinas (BSP) to avoid further tightening in its monetary policy.”

The government economist was referring to the series of preemptive actions made by the central bank to temper signs of inflation pressures and elevated inflation expectations.

On September 11, the Monetary Board decided to raise its key policy rates and the interest rate for special deposit accounts (SDA) by 25 basis points each. At its March 27 meeting, the policy making body of the BSP raised the reserve requirement ratio for banks to 19 percent, then further to 20 percent at its May 8 meeting.

Meanwhile, Beltran said that the September inflation rate will also enable the attainment of a higher gross domestic product (GDP) growth rate in the second semester.

Philippine real GDP growth accelerated to 6.4 percent in the second quarter of 2014, from 5.6 percent in the first quarter, to bring the first half growth to 6 percent.

Beltran also urged the Departments of Agriculture and Trade and Industry to continue the streamlining of product deliveries to the markets and to act more decisively if there are factors that constrain the process.

“The government should implement longer-term solutions to the port and transport congestion,” he said.

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