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Central bank keeps inflation target despite rebasing

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‘I don’t think we need to change our targets because no matter how you measure inflation, no matter what base year you use, 2-4% inflation target makes sense given our stage of development as well as the inflation dynamics.’ -- Diwa C. Guinigundo, deputy governor of the Bangko Sentral ng Pilipinas. — BW FILE PHOTO

THE BANGKO SENTRAL ng Pilipinas (BSP) will not adjust its inflation target despite rebasing of the consumer price index (CPI) that takes effect this year, a senior official said.

Deputy Governor Diwa C. Guinigundo said the Bangko Sentral ng Pilipinas (BSP) does not have to move its 2-4% target range for annual inflation in response to the adjustment in the CPI, which is the theoretical basket of widely used goods and services that is the basis for computing year-on-year price changes.

Last week, the Philippine Statistics Authority (PSA) announced that it will shift the base year for monthly CPI to 2012 starting this month from the 2006 previously. The agency said that rebasing is necessary in order to reflect “economic, social and technological changes” that likely influenced changes in consumption patterns.

The 2006-based CPI assigned the following weights to commodity groups: 38.98% for food and non-alcoholic beverages; 22.46% for housing, water, electricity, gas and other fuels; 12.03% for restaurant and other miscellaneous goods and services; 7.81% for transport; 3.37% for education; 2.99% for health; 2.96% for clothing and footwear; 2.26% for communication; 1.99% for alcoholic beverages and tobacco as well as 1.93% for recreation and culture.

“I don’t think we need to change our targets because no matter how you measure inflation, no matter what base year you use, 2-4% inflation target makes sense given our stage of development as well as the inflation dynamics,” Mr. Guinigundo told reporters on the sidelines of a press briefing on Friday.

The central bank has maintained this target range for annual inflation since 2015.

For 2018, the BSP has acknowledged that the full-year pace will likely overshoot the range and average at 4.3% due to price pressures from the tax reform law.

January inflation clocked four percent under the 2006-based consumer basket, the fastest rate seen in over three years. The rate is expected to have picked up further last month, with the BSP giving a 4-4.8% estimate. — Melissa Luz T. Lopez