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Diokno emphasizes the need for non-monetary solutions in the face of rising inflation

Governor Benjamin Diokno of the Bangko Sentral ng Pilipinas (BSP) stated Tuesday that effective execution of non-monetary measures would assist alleviate supply-side pressures on the domestic inflation rate.

Because of the reduced annual inflation rate in the transport index, the pace of price rises in June fell to 4.1 percent from 4.5 percent in the preceding three months. The six-month average of inflation was 4.4 percent in June, remaining over the government’s 2-4 percent goal range until 2023.

Despite the high inflation rate, Diokno stated that last month’s result was within the central bank’s projected range of 3.9-4.7 percent and that it “is consistent with predictions that inflation may stay over goal in the short term as meat and oil prices remain higher.”

Inflation is expected to average 4% this year, according to monetary officials.

“Price pressures are expected to abate, leading to a reversal of average inflation around the goal in 2022 to 2023,” Diokno added.

He said that “risks to the inflation forecast remain roughly balanced” and that “effective execution of direct non-monetary measures will be critical in reducing additional supply-side pressures.”

The increase in international commodity prices is due to “supply chain constraints,” according to Diokno, who added that “recovery in global demand may contribute upward pressures on inflation.”

The “emergence of new coronavirus strains, which may postpone the relaxation of lockdown measures and dampen expectations for domestic growth,” however, is anticipated to counteract these considerations.

“The BSP will continue to monitor changing economic circumstances and difficulties posed by the epidemic to ensure that its monetary policy stance is compatible with its pricing and financial stability objectives,” Diokno said.

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