BSP moves away from monthly inflation forecasting — Espenilla

THE Bangko Sentral ng Pilipinas (BSP) said it will shift its emphasis to two-year assessments of inflation patterns rather than monthly forecasts.

BSP Governor Nestor A. Espenilla, Jr. said he will not be releasing an estimated range for July, contrary to previous practice.

“I’m not inclined to give a July forecast. That’s not the BSP’s policy focus. Our focus is on the inflation path two years ahead,” Mr. Espenilla said in a text message to reporters when asked for the central bank’s latest projection.

Mr. Espenilla assumed the top central bank post on July 3. His predecessor, former Governor Amando M. Tetangco, Jr., would announce a forecast range for monthly inflation readings days ahead of the release of official data from the Philippine Statistics Authority (PSA).

The PSA will release July inflation data on Aug 4.

Market participants track monthly inflation readings, particularly if the pace of price increases remain within the central bank’s 2-4% target band.

The BSP considers inflation targeting to be its primary mandate, particularly to keep price increases manageable to assist the economy’s upbeat growth momentum. Analysts have said that keeping inflation at bay would accord the central bank sufficient room to keep interest rates low much longer, as domestic conditions would not warrant any fresh stimulus from the monetary authority.

Prices of widely used goods and services rose by 2.8% in June, easing from May’s 3.1% reading but much higher than the 1.9% from a year earlier.

Last month’s level brought the six-month inflation average to 3.1%. At this pace, the full-year level will be in the middle of the target range, but well above the 1.8% reading in 2016.

Last week, BSP Deputy Governor Diwa C. Guinigundo said inflation is likely to soften in the coming months on the back of lower oil prices, noting that the indicator may have hit its peak in March and April at 3.4%.

The BSP’s latest estimates point to a possible return to the 3.4% level by August, but Mr. Guinigundo said that this projection could be tempered given recent declines in oil prices and “moderate” adjustments the other commodity costs.