Vigilant monetary policy design for price stability

THE Bangko Sentral ng Pilipinas ( BSP) remains steadfast in maintaining price and financial stability, consistent with the National Government’s overarching goal of higher and more inclusive economic growth.

The year- to- date (JanuaryMay 2018) average headline inflation of 4.1% is slightly above the high end of the target range of 3 ± 1 percentage point average inflation for 2018. This reflects mainly higher global crude oil prices as well as faster price increases for some food items and services. While inflation is expected to remain elevated in 2018 due primarily to temporary supply-side factors, it is projected to return to within the target range in 2019.

The BSP notes that risks to the inflation outlook continue to lean toward the upside, with price pressures emanating from possible adjustments in transport fares, utility rates, and wages. Accordingly, the BSP continues to be vigilant against elevated inflation expectations and their potential impact on the inflation outlook. The BSP stands ready to take immediate monetary policy action as necessary to achieve its price and financial stability objectives, even as it supports carefully coordinated efforts with other government agencies in implementing nonmonetary measures to mitigate the impact of supply-side factors on inflation and social welfare.

Meanwhile, the BSP also continues to enhance the effectiveness and appropriateness of its monetary policy toolkit in response to the challenges of a fast-evolving financial environment. With the implementation of the interest rate corridor (IRC) framework in 2016, the BSP has since been better able to manage