‘Slow global demand main downside risk to PH inflation’


BSP sees slack at low end of 2-4% target for 2016

A KEY threat to the country’s inflation outlook is slow global demand, the Bangko Sentral ng Pilipinas (BSP) said.

As one of the highlights of its August 11 meeting, the BSP’s Monetary Board (MB) noted that weak global economic activity is the primary factor putting a drag on inflation expectations for 2016.

As such, the central bank is forecasting that inflation is likely to settle at the lower end of its 2-4 percent target range for the year. “The risks to future inflation appear to be broadly balanced. Slower global economic activity constitutes the main downside risk, while upside risks are mainly associated with pending petitions for adjustments in electricity rates.”

With the inflation rate clocking in at 1.8 percent in August, the year-to-date headline inflation settled at 1.5 percent—still below the BSP’s target range.

The 1.5 percent average inflation in the first eight months of 2016 will “steadily rise” for the rest of the year “driven by continued strength in domestic economic activity, weaker domestic currency, and the impact of positive base effects,” the central bank noted.

On the other hand, consumer prices in 2017 and 2018 are likely to fare better for inflation than the expectations for 2016.

Inflation is likely “to approach the midpoint target range [of 2-4 percent]in the first half of 2017 and expected to dwell within the target range for the rest of the forecast horizon,” the BSP said.


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