The Bangko Sentral ng Pilipinas (BSP) was seen shifting on Wednesday to a lower inflation target as forecasts for November were expected to be within the range of 3.5 percent to 4.3 percent.
“Stable food prices continue to decline and international oil prices and lower electricity rates for the month are seen to dampen inflation pressures,” BSP Governor Amando M. Tetangco Jr. said.
“If, among others, inflation continues on this decelerating trend and if there continue to be no signs of second-round effects, then there is room for the BSP to pause and keep its current stance of monetary policy,” he added.
The BSP continues to adhere to its inflation-targeting framework and adapts quickly to changes in the inflation outlook.
When the BSP hiked both the benchmark and special deposit account rates in September, it said the inflation target for 2015 were at risk.
When it paused in October, the BSP reverted to the assessment of a more manageable inflation environment, which reflects in part the recent slump in commodity prices, according to a Nomura global market research.
The consumer price index (CPI) inflation target was seen lowered to a range of 2 percent to 4 percent in 2015, having been at 3 percent to 5 percent for the last four years, according to Nomura. Its analyst said domestic demand-side inflation risks relative to the BSP’s more ambitious inflation target should remain the most important policy driver.
“We expect the new target, even as commodity prices in our assumptions are likely to stay relatively low, to again be threatened from mid-2015, prompting the BSP to resume hiking,” Nomura analysts said.
Tetangco said the BSP will continue to keep a watchful eye on evolving price and demand trends to ensure price stability.