Central bank sees higher 2014 inflation

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The Bangko Sentral ng Pilipinas (BSP) expects higher inflation this year, but gives no clue if a policy tightening is on the horizon.

The inflation rate “is moving up slightly, but the overall assessment right now is that for 2014, the average inflation rate would still fall within the inflation target range of 3 percent to 5 percent,” BSP Governor Amando Tetangco Jr. said in his keynote speech at the Security Bank Economic Forum on Friday.

He said that while the central bank sees inflation inching up, it is expected to remain manageable over the policy horizon.

In an earlier text message, the BSP governor said the inflation rate for February is projected to be in the range of 3.8 percent to 4.6 percent due to upward pressure from higher petroleum and rice prices. But lower electricity rates are expected to offset some of the upside pressures as the Malampaya natural gas facility and other power plants resume normal operation.


Inflation in January was recorded at 4.2 percent.

Tetangco stressed that while policy space looks to be narrowing this year, monetary authorities still have room to maneuver.

“There is policy space on the monetary side, albeit slightly narrower than last year, but the bottom line is . . . there is room to maneuver for us to address the risks that lie ahead,” he added. “So when I say narrowing, I really meant that there is narrower space or room now compared to last year. But we have space. That means . . . you can maneuver by either keeping it steady or [changing]it,” he said.

In its latest meeting, the BSP kept its benchmark interest rates unchanged after it determined that the inflation environment remains benign. The interest rate for overnight borrowing or reverse repurchase (RRP) facility was kept at 3.5 percent, while the overnight lending or repurchase facility was also retained at 5.5 percent.

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