by Joan Santiago
The Bangko Sentral ng Pilipinas (BSP) continue to see within target inflation for this year and the next but it is on the look-out for volatility in market sentiment given the current domestic and external developments.
“Our current runs still show within target full year averages over the policy horizon (2012-13),” BSP Governor Amando Tetangco Jr. told PNA in a text message.
The BSP chief said external factors like volatility in international commodity prices remain the major upside risk to inflation while the downside risks include weak global economic prospects and strengthening of the peso due to robust capital flows.
“We need to see how these forces translate to domestic pump, utility and food prices, among others as well as on consumption preferences,” he said.
Tetangco explained that monetary officials “also continue to monitor domestic demand conditions on one hand and weather-related supply disruptions on the other.”
“That said, we are mindful of volatility in market sentiment and we will continue to keenly monitor market conduct and make refinements to stance of policy as appropriate,” he added.
Tetangco earlier said BSP’s policy stance remains appropriate but stressed that monetary officials are ready to put in place measures to address negative impact of domestic and overseas developments on inflation.
The government’s inflation target for this year until 2014 is a range of three to five percent.
In the previous rate setting meet of central bank’s policy-making Monetary Board (MB) last July 26, the average inflation forecast for this year was maintained at 3.1 percent while the 2013 figure was reduced to 3.2 percent from 3.4 percent due to lower inflation rate last June, stronger peso, and drop in the prices of oil in the world market.
Inflation in the first seven months this year averaged at 3.1 percent with the July level rising to 3.2 percent from month-ago’s 2.8 percent.