BSP prepares for possible policy change amid rising inflation

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Bangko Sentral ng Pilipinas. (FILE PHOTO)

Metro Manila (CNN Philippines, April 21) — As commodity prices continue to rise, the Bangko Sentral ng Pilipinas (BSP) will closely monitor inflation expectations in case it needs to adjust monetary policy.

"Despite ongoing price pressures, inflation remains in line with the target range over the policy horizon," the BSP said in its first quarterly inflation report of the year. "Nevertheless, authorities see the balance of risks to the inflation outlook as remaining tilted toward the upside, which argues for maintaining vigilance in setting the stance of monetary policy going forward."

The BSP added it remains watchful against any signs of second-round effects and inflation becoming broader based keep prices stable.

Headline inflation, which reflects the change in prices in basic goods, hit a three-year high this February at 3.9 percent.

READ: Philippine inflation rate hits 3-year high

The rise in inflation was due to price increases in selected food items, alcoholic beverages, and tobacco products, following the implementation of the tax reform law in January, global oil prices, and U.S. monetary policy.

READ: Lower income tax, higher taxes on sugar, petroleum, tobacco products by 2018

Should the need arise, the BSP is ready to adjust its monetary policy, which is currently set at 3.0 percent interest rate.

The bank downplayed the lukewarm sentiment of households and businesses, citing not only their concerns over higher commodity prices but also the slowdown in business and consumer activity after holiday and harvest seasons.

Amidst higher commodity prices, the bank expects the Philippine economy to continue its steady growth.