Philippine central bank to examine all potential drivers of inflation

A woman arranges vegetables in a market stall in Edsa Kamias in metro Manila May 23, 2018. — Reuters pic
A woman arranges vegetables in a market stall in Edsa Kamias in metro Manila May 23, 2018. — Reuters pic

MANILA, June 14 — The Philippine central bank will consider all potential drivers of future inflation, not just recent price trends, when it reviews monetary policy next week, its governor said yesterday.

Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla said this when asked whether another interest rate hike was on the table at the meeting that has been moved to June 20, a day earlier than the original schedule.

“It's a fairly complex environment that we need to navigate,” he said.

Espenilla said the policy meeting had been moved due to “tight schedule of other activities.”

Accelerating inflation and strong economic growth have raised the chances for a second rate increase this year.

The BSP increased its policy rates by 25 basis points on May 10, the first hike in more than three years, to tame price pressures and manage inflation expectations.

Inflation picked up further in May, bringing the average rate in the first five months of the year to 4.1 per cent, outside the central bank's 2-4 per cent comfort range.

“Recent developments on inflation and economic activity are key inputs but these are certainly not the only consideration,” Espenilla told reporters.

“We'll be examining closely all the potential drivers of future inflation through the various transmission channels as affected by global developments, expectations formation, and uncertainty,” he added.

Espenilla's remarks came as the Philippine peso lost more ground against the US dollar yesterday, hitting its weakest level since June 2006.

The greenback strengthened against major currencies such as the yen and the euro ahead of the Federal Reserve's policy meeting later yesterday. — Reuters

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