INFLATION RISKS are seen “evenly balanced” this year, even with the rise in prices expected to settle firmly within the government’s target, the Bangko Sentral ng Pilipinas (BSP) said.

“The risks to future inflation were seen to remain evenly balanced for 2019 while downside risks to the outlook were projected to dominate in 2020,” read the minutes of the central bank’s policy meeting held March 21, which were released on Wednesday.

The BSP said among the main upside risks to inflation for this year are pending petitions for electricity rates and fare adjustments, as well as proposed excise taxes levied on alcohol beverages.

The potential impact of a weak El Niño could also stoke inflation, the central bank said, as it “could lead to droughts in the first semester of 2019 and subsequently affect domestic production of rice and other agricultural commodities.”

“The onset of the El Niño phenomenon presents a potential upside risk to food inflation in the near term,” it said.

“Meanwhile, slower global economic growth due to protectionist policies in advanced economies as well as geopolitical tensions and the potential renegotiation for lower tariff rates on meat products continue to be the main downside risks to inflation,” the BSP added.

At its March 21 meeting, the BSP’s policy-setting Monetary Board voted to keep benchmark interest rates unchanged, citing the need to stay cautious given risks to economic growth even as inflation is steadily dropping.

Policy rates were kept within the 4.25-5.25% range, with the key rate of 4.75% still at a decade-high.

During that review, the central bank trimmed its 2019 inflation forecast to three percent from 3.1% previously on the back of the lower-than-expected February print and with the downward path seen to continue for the rest of the year. Meanwhile, the 2020 forecast was kept at three percent. Both are well within the BSP’s 2-4% full-year target range.

Headline inflation eased for the fifth straight month in March to 3.3% — the slowest since January 2018’s 3.4%. This is slower than the 3.8% print in February and 4.3% in the same month last year.

Year-to-date, inflation averaged at 3.8%, within the BSP’s target range for 2019. The BSP’s next rate-setting review is on May 9. — RJNI