THE local growth of consumer prices is forecast to remain within target on average for this year despite the expected uptrend in the global oil prices, the Bangko Sentral ng Pilipinas (BSP) said on Thursday.
In a press briefing, BSP Governor Benjamin Diokno said they have already factored in the recent uptrend in global oil prices into the latest baseline inflation projections which showed a target-consistent inflation path over the policy horizon.
In their latest monetary policy meeting in May, the BSP revised their forecast for the year to 3.9 percent down from the 4.2-percent forecast in their February meeting.
For next year, however, the BSP revised their target higher from 2.8 percent to 3 percent due to the expected increase in global crude oil prices and faster economic prospects.
“The uptrend in global oil prices in recent months has been driven by changes in supply-demand dynamics. Improved prospects in global demand as countries gradually recover from the pandemic and the Opec [Organization of the Petroleum Exporting Countries] Plus production cuts have pushed oil prices higher in 2021 compared to the previous year’s levels,” Diokno said.
The governor, however, admitted that they will still continue to closely monitor developments in oil prices, especially as this can lead to second-round inflationary effects.
“Central banks typically accommodate commodity price increases as they tend to be transitory in nature. However, the impact of global demand-supply imbalances on oil prices may become more persistent and could potentially lead to second-round effects in oil-importing economies,” Diokno said.
“The BSP remains on the lookout for possible second-round effects that may require a monetary response, even as underlying inflation and the overall inflation outlook remains manageable in the Philippines due to the amount of prevailing slack in the domestic economy,” he added.
The governor, however, said that providing support to domestic demand remains a “key priority for monetary policy” given the expected path of inflation and the continued downside risks to economic activity.
The BSP is expected to have their next monetary policy meeting on June 24. This will be their fourth monetary policy meeting of the year.
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