Inflation above ’21 target band

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The country’s PRIVATE economists are seeing inflation hitting higher than expected for this year, a recent survey by Bangko Sentral ng Pilipinas (BSP) showed.

In September of this year, a survey of 21 banking economists predicted that average inflation in the country would reach 4.3%, further from the target range of 2-4% for 2021 and above the average of 4%. , 1% expected three months earlier.

According to the BSP, analysts expect inflation to remain above the upper end of the government’s target range in 2021, with upside risks including supply disruptions caused by the reimposition of stricter quarantine measures, adverse weather conditions during the rainy season, persistent African swine fever, rising global crude oil prices and the weakening of the peso against the US dollar.

Expectations could be tempered, however, by potentially weak domestic demand due to low purchasing power driven by high unemployment and prolonged and stricter foreclosure measures as part of the local transmission of the Delta variant, which could weigh on on recovery efforts.

For next year, the average inflation forecast based on the survey remained unchanged at 3.2%, while the average inflation forecast for 2023 was higher at 3.2% from 3.1%.

Based on this analysis, private economists predict that the BSP will keep the current policy parameters unchanged for the remainder of 2021 in order to support the gradual recovery of the economy.

Meanwhile, most analysts expect the BSP to end its accommodative stance by the end of 2022.

BSP Governor Benjamin Diokno said earlier that the BSP assessment continued to show that inflation would return to target levels in the coming months.

“BSP staff forecast average inflation this year to be around 4.5%, slightly above the upper range of the target of 2-4%. Inflation is expected to average 3.3% in 2022, ”Diokno said.

“What is the implication on monetary policy? Since inflationary pressures come from the supply side, there appears to be no justification for monetary intervention.

For example, would a rise in interest rates lead to an increase in the global supply of crude? Of course not, ”added the governor.

The BSP kept its monetary policy rates at an all-time high throughout the year to support the country’s recovery.


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