Inflation seen...

the first half,” its latest report added.

“Exports should continue its recovery as the year progresses and should provide an added stimulus to the fast-growing domestic demand (while) the peso’s recovery should prove temporary as the US economy gathers new momentum given business optimism over President Trump’s initiatives.”

BSP Governor Amando M. Tetangco Jr. has reiterated that based on the April inflation, its assessment of a manageable inflation outlook over the policy horizon is intact. However, he also noted that BSP will “remain watchful of emerging risks to future inflation brought by possible shifts in both external and domestic fronts.”

At its policy meeting last week, the BSP’s Monetary Board kept the overnight reverse repurchase facility at three percent. The central bank said inflation is “elevated” because of recent food price increases and underlying inflation pressures. Inflation will also remain “tilted toward the upside given the transitory impact of the proposed tax reform program as well as possible further adjustments in transportation fares and electricity rates.”

Tetangco continues to be confident of the BSP’s steady policy stance which he thinks is still appropriate. He expects inflation rates will move closer to the upper target band of the two percent to four percent range in the third quarter before easing to previous lows. As for the exchange rate market, the BSP chief said it is a free market and they will only intervene if volatility pressures escalates.

Tetangco has said that the peso remains a competitive currency, supported by foreign exchange sources from remittances, tourism, and the BPO sectors.

The currency’s depreciated value as well as increased electricity rates were some of the reasons why inflation rate has risen to above three percent level since February.