DOF sees enough room for low in­ter­est rate

Manila Bulletin - - Business - By CHINO S. LEYCO

The coun­try’s low in­fla­tion environmen­t pro­vides the Bangko Sen­tral ng Pilip­inas (BSP) the ad­e­quate legroom to keep its in­ter­est rates steady to sup­port eco­nomic re­cov­ery, the De­part­ment of Fi­nance (DOF) said.

Based on the lat­est DOF eco­nomic bul­letin, Fi­nance Un­der­sec­re­tary and Chief Econ­o­mist Gil S. Bel­tran, said the eas­ing in­fla­tion rate will stim­u­late the lo­cal econ­omy shut­tered by the coro­n­avirus pan­demic.

“Low in­fla­tion will pro­vide ad­e­quate room for low in­ter­est rates to sup­port eco­nomic re­cov­ery as the coun­try tran­si­tions to the new nor­mal,” Bel­tran said in the re­port sub­mit­ted to Fi­nance Sec­re­tary Car­los G. Dominguez III.

In Septem­ber, the rate of in­crease in con­sumer prices slowed to 2.3 per­cent from 2.4 per­cent in the pre­vi­ous month, well within the gov­ern­ment’s tar­get of 2.0 per­cent to 4.0 per­cent.

Bel­tran said the slow­down in the gen­eral price level was due mainly to food items, which av­er­age prices dropped to 1.5 per­cent from 1.74 per­cent last month, over­whelm­ing the uptick in price of non-food prod­ucts.

Like­wise, rice prices de­clined from year-ago’s level by -0.57 per­cent, while veg­eta­bles de­clined by 2.66 per­cent, and corn de­creased 0.61 per­cent.

Meat prices, how­ever, in­creased by 2.92 per­cent, but at a much slow pace than the 4.03 per­cent in Au­gust.

On the other hand, non-food clus­ter slightly picked up pace from 2.1 per­cent in Au­gust to 2.45 per­cent in Septem­ber due to trans­porta­tion and util­i­ties.

Prices of trans­port ser­vices jumped to 16 per­cent, while that of the hous­ing rental util­i­ties group inched up to 1.15 per­cent last month.

Act­ing So­cioe­co­nomic Plan­ning

Un­der­sec­re­tary Karl Ken­drick T. Chua, mean­while, said that while the head­line in­fla­tion last moth re­mained low and sta­ble, the some up­side risks con­tin­ued to per­sist.

“Due to sta­ble sup­ply, free move­ment of goods, and re­cent struc­tural re­forms, in­fla­tion in Septem­ber was well be­low the mid­point of the cen­tral bank tar­get at 3 per­cent,” Chua said.

He em­pha­sized that land­mark re­forms, such as the Rice Tar­if­fi­ca­tion Law (RTL) of 2019, en­abled the coun­try to with­stand sup­ply shocks that could have oth­er­wise threat­ened over­all price sta­bil­ity.

How­ever, the on­set of La Niña, the con­tin­ued pres­ence of African Swine Fever in the coun­try, im­po­si­tion of lo­cal­ized lock­downs, and sup­ply chain bot­tle­necks could pose up­side risks to the low in­fla­tion environmen­t.

“Con­cerned gov­ern­ment agen­cies and lo­cal gov­ern­ment units also need to strengthen the im­ple­men­ta­tion of its phy­tosan­i­tary and biose­cu­rity mea­sures and in­ten­sify its meat in­spec­tion ef­forts,” Chua said.

“This is to sup­press the spread of po­ten­tially con­tam­i­nated meat prod­ucts, as new cases of African swine fever and Avian In­fluenza are re­ported,” he added.

He said that the gov­ern­ment could also ex­plore and ex­pand projects that will im­prove the coun­try’s wa­ter man­age­ment sys­tems, dis­trib­ute cli­mate-re­silient seed va­ri­eties, pro­vide post-har­vest fa­cil­i­ties, and en­sure busi­ness con­ti­nu­ity and de­liv­ery of goods across the coun­try.

Like­wise, Chua said the new waves of COVID-19 cases around the world and slower than ex­pected eco­nomic re­cov­ery con­tinue to put down­ward pres­sures on global oil prices.

De­spite this, Chua as­sured that the gov­ern­ment is closely mon­i­tor­ing global price move­ments to re­main ready to ad­dress any po­ten­tial shocks.

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