Oil price upticks in the international market due largely to Russia’s invasion of Ukraine resulted in the surge of the country’s inflation rate last March to 4 percent from the previous month’s 3 percent.
This brought the average inflation in the first quarter this year to 3.4 percent, within the government’s 2-4 percent target range until 2024.
In a Viber message to journalists on yesterday, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said “inflation expectations have likewise risen, but continue to be anchored to the 2-4 percent target band.”
Increases in oil prices and their impact on commodity prices in both the international and domestic markets made Philippine monetary authorities hike the government’s average inflation forecast for this year to 4.3 and 3.6 percent for 2023. These were previously at 3.7 percent for 2022 and 3.3 percent for 2023.
Diokno said “the economic consequences of Russia’s invasion of Ukraine have become a significant headwind in global economic recovery.”
He said this development may impact the domestic economy through “slower world GDP (gross domestic product) growth, higher crude oil prices, higher world non-oil prices, and potential second-round effects on inflation through transport fares, wages, and food prices.”
“Under these circumstances, the BSP will closely monitor the emerging risks to the outlook for inflation and growth, and remain vigilant against possible second-round effects from supply-side pressures or any shifts in the public’s inflation expectations,” he said.
Diokno said the central bank “continues to have a wide arsenal of policy instruments to respond to possible adverse impact of external shocks.”
“The BSP likewise supports the timely implementation of direct non-monetary measures by the government to mitigate the impact of the Russia-Ukraine conflict on global oil and non-oil commodity prices,” he said, adding “previous episodes of supply-side shocks in the country have shown that these are best addressed through timely non-monetary policy interventions that could ease directly domestic supply constraints and prevent second-round effects on prices.”*PNA
