Government Keeps Inflation Target at 3 Percent + 1 Percentage Point for 2020 – 2022

Government Keeps Inflation Target at 3 Percent + 1 Percentage Point for 2020 � 2022

In line with the inflation targeting approach to the conduct of monetary policy, the Development Budget Coordination Committee (DBCC), during its meeting on 11 December 2019, decided to keep the current inflation target at 3.0 percent 1.0 percentage point for 2020 � 2022. The government's inflation target is defined in terms of the average year-on-year change in the consumer price index (CPI) over the calendar year. The announcement of the inflation target is in line with the BSP's commitment to transparency and accountability as well as the forward-looking approach in the conduct of monetary policy.

The 3.0 percent 1.0 percentage point inflation target for 2020 � 2022 continues to be an appropriate quantitative representation of the BSP's medium-term price stability goal that is conducive to the balanced and sustainable growth of the Philippine economy. Latest inflation forecasts indicate within-target inflation over the policy horizon, even as the balance of risks to the inflation outlook continue to lean slightly toward the upside in 2020 and toward the downside in 2021. While price volatilities cannot be ruled out, inflationary impulses from international commodity prices are expected to remain modest. This expectation is supported by the current assessment of favorable demand-supply balance and lower pass-through to domestic inflation of exchange rate and international commodity price inflation. Similarly, demand-induced price pressures are likely to remain manageable over the target horizon. Improved productive capacity of the domestic economy, fueled by higher infrastructure investments by the National Government alongside the implementation of purposeful structural reforms, implies continued robust economic growth amid a low and stable inflation environment.

The BSP remains steadfast in its commitment to its price stability mandate. Going forward, the BSP will continue to closely monitor inflation as well as the factors that influence inflation trends and ensure that the monetary policy stance remains appropriate to keeping inflation within the government's target range.

Source: Bangko Sentral ng Pilipinas (BSP)