Central bank sees 2019 inflation rate to settle within target

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Metro Manila (CNN Philippines, January 18) — The Bangko Sentral ng Pilipinas (BSP) expects the inflation rate, or the rise in prices of goods and services, to slow down to 3.2 percent this year well within the target.

BSP Assistant Governor Francisco Dakila added inflation is expected to ease further to 3 percent in 2020.

"As a basis for that outlook, we already incorporated the impact of the higher excise taxes on fuel. Even with the higher excise taxes on fuel, we expect inflation to revert back within the target range for the two years," Dakila said in a media briefing Friday.

The forecast is within government's target of reducing inflation to 2 to 4 percent. It is also much lower than the annual inflation of 5.2 percent in 2018.

The second tranche of the Tax Reform Acceleration and Inclusion (TRAIN) Act places an additional ₱2 per liter excise tax on diesel and gasoline, ₱1 per liter of kerosene, and ₱1 per kilogram of cooking gas or liquefied petroleum gas or cooking gas for 2019.

However, Dakila said non-monetary measures will contribute to slowing down inflation.

"The implementation of non-monetary measures including the provisions under the rice tarrification are expected to continue to alleviate the impact of supply-side factors on inflation," he said.

The lifting of rice import limits in exchange for tariffs will help boost supply to bring down retail prices.

Dakila said the BSP will continue to monitor the impact of highwer interest rates by 175 basis points in the second half of 2018, as a counter-inflationary measure in that year.

He also said the private sector's expectations for 2019 inflation have eased.