BSP downscales inflation forecast for ’12-‘14

October 25, 2012 10:35 pm 

By Joann Santiago

MANILA, Oct. 25 — The Bangko Sentral ng Pilipinas Thursday revised downwards its average inflation forecast for 2012-14 as inflation continue to be benign.

To date, this year’s forecast was lowered to 3.3 percent from 3.4 percent last September.

Also, rate of price increases for 2013 is projected to average at 3.9 percent, lower than the 4.1 percent previously while the 2014 figure was cut down to 3.1 percent from 3.3 percent.

These projections are at the lower end of the government’s three to five percent inflation target for this year until 2014.

BSP Deputy Governor Diwa Guinigundo, in a briefing, Thursday said the downward revisions of the forecasts “underscores the first reason why the Board reduced the policy rates by 25bps.”

“ The inflation outlook remains very benign and the expectations of the general public are very close to the forecast of the Bangko Sentral ng Pilipinas,” he said.

On Thursday, central bank’s policy-making Monetary Board cut for the fourth time this year the BSP’s policy rates by 25 basis points (bps) because of the weak global economy.

Thus, the overnight borrowing or reverse repurchase (RRP) rate is now at record-low of 3.5 percent and the overnight lending or repurchase rate is at 5.50 percent.

The Board previously slashed the central bank’s rates by 25 basis points each in January, March and July.

BSP Governor Amando Tetangco Jr. attributed the Board’s decision to continued benign inflation and within-target inflation expectations amid the weak global economic environment.

He expects the world economy to remain weak given the fiscal and financial crisis in the US and Europe.

He, however, stressed that “risks to the inflation outlook continue to be broadly balanced” because of continued improvement in domestic fundamentals such as strong external payments position and wide fiscal space. (PNA)

HBC/JS

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