Inflation seen falling to 2%

Medalla explained that supply shocks are to blame for the high inflation rate in the country, hence government’s intention to speed up the importation of goods should help bring down prices

The Bangko Sentral ng Pilipinas on Tuesday said that inflation in the Philippines is likely to decline to below four percent by the third quarter, and to two percent by early next year as aggressive supply-side interventions take hold.

During the Philippine economic briefing held in Frankfurt, Germany, aired live on Facebook Monday, BSP Governor Felipe Medalla cited indications that inflation is stabilizing with the month-over-month level already decelerating.

“We expect that by the end of the third quarter or by the fourth quarter, we will already be below four percent,” Medalla said, assuring business leaders that the country would be “very successful” in bringing down inflation.

“Unless there is a large shock again that’s associated with the weather, we do not see the shocks propagating into a self-fulfilling prophecy because of our very aggressive monetary policy,” he added.

Medalla explained that the supply shocks are to blame for the high inflation rate in the country. Hence, he said, stricter regulations and the government’s intention to speed up the importation of specific goods like sugar and onions should help bring down prices.

“We are well into a target-consistent path of inflation. We are not there yet but we will be there,” Medalla said.

The present inflation run is the longest so far, one that was initially blamed on global difficulties and then on domestic supply-side factors, according to Medalla.

Base effects are often observed to subside after around 16 months, he explained.


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