MANILA: The Philippine central bank says it may consider a stronger monetary policy response if elevated inflation expectations become entrenched, vowing it “will take all necessary action” to ensure that inflation returns to its 3% target.
“If the data and our assessment of evolving risks point to higher inflation expectations becoming entrenched, then we may consider a stronger response,” the Bangko Sentral ng Pilipinas (BSP) said.
The BSP raised its key policy rate by 25 basis points to 4.5% in April.
The BSP said it does not target a specific exchange rate level and intervenes only when excessive volatility poses a serious risk to inflation expectations.
The peso has risen 6.1% versus the US dollar in the last three months, according to London Stock Exchange Group plc data.
The Philippines is sensitive to oil price shocks due to its high dependence on oil imports and current account deficits, but a weaker peso cushions the impact by supporting exports, remittances and revenues from business process outsourcing
BSP governor Eli Remolona said last month the central bank was considering an off-cycle rate hike ahead of a scheduled meeting on June 18. — Reuters
Annual inflation hit 7.2% in April, the highest in three years and well above the 2% to 4% comfort range of the Philippine central bank. — Reuters
