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It may get worse before it gets better.
The central bank on Tuesday said that the pace of increases in the prices of goods and services in the country will likely remain high for the rest of the year before normalizing in 2019 once so-called “transitory effects” pass.
In a statement to reporters, Bangko Sentral ng Pilipinas Gov. Nestor Espenilla Jr. also downplayed the possibility of a preemptive rate hike on the part of monetary regulators to combat inflation, saying any policy tightening done today will only be felt in 2019 instead of the current year.
“Let’s not forget that monetary policy operates with a long lag,” he said, after the government announced that the inflation rate accelerated to a three-year high of 3.9 percent in February based on the Philippine Statistics Authority’s 2012 base, or 4.5 percent based on the 2006 metric.
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“Whatever monetary policy action we do now, will more likely be felt in 2019 and beyond rather than 2018,” Espenilla said. “That’s why we don’t necessarily react to February 2018 but must look much further ahead and rely on forecasts.”
The BSP chief described the “elevated” inflation rate for February as being “in line” with the central bank’s updated forecast for a “temporarily higher inflation than target range in 2018 due to transitory factors.”
