INFLATION will likely stay benign as the economy recovers over the remainder of the year and into the first quarter of 2021, according to the Bangko Sentral ng Pilipinas (BSP).

“We continue to see inflation to be benign until the first quarter of 2021 as the economy recovers from the pandemic. But we see slight adjustments or increases in the inflation outlook once the economy recovers,” Assistant Governor Iluminada T. Sicat said in an online briefing Monday.

Central bank officials said factors that could lead to higher inflation include adjustments to utility rates and rising global rice prices.

Ms. Sicat said the outlook also factors in an uptick in global oil prices in recent months.

“The price of global oil is hovering around $40 to $43 (per barrel) which is still lower compared to price levels in 2019,” Ms. Sicat said.

The potential impact of coronavirus disease 2019 (COVID-19) on economic growth prospects continues to be a factor in slowing the growth of commodity prices, she added.

“We don’t see much pressure on inflation given the fact that domestic demand remains weak as a result of uncertainties arising from the pandemic,” Ms. Sicat said.

The BSP expects inflation to average 2.3% and 2.6% for 2020 and 2021, respectively, which are well within the 2-4% target. It has a 3% average inflation forecast for 2022.

The inflation outlook supports the BSP’s intent to maintain an accommodative stance “to boost market confidence.”

“Looking ahead, the BSP believes that keeping monetary policy sufficiently accommodative amid a benign inflation environment will continue to mitigate strong downside risk to growth and boost market confidence,” BSP Governor Benjamin E. Diokno said.

Mr. Diokno said the gradual easing of restriction measures since May will allow the central bank’s monetary policy actions and relief measures to gain traction and support the slow but sustainable recovery of the domestic economy.

Citing the benign inflation environment, the BSP slashed rates by a total of 175 basis points this year. This reduced the overnight reverse repurchase, lending, and deposit facilities to 2.25%, 2.75%, and 1.75%, respectively.

Mr. Diokno has said the monetary authorities are pausing to gauge how their monetary actions have so far impacted the economy and the financial markets. — Luz Wendy T. Noble