MANILA, Philippines — The Bangko Sentral ng Pilipinas expects inflation to be within its target in the next three years as it vowed to use the full range of its monetary instruments to save jobs and lives during the pandemic.
“We expect inflation to be benign, meaning it is within our target which is two to four percent for the next three years,” BSP Governor Benjamin Diokno said at a press briefing yesterday when asked for the central bank’s inflation outlook for the second quarter.
“Remember, in 2018, the prices were high but we managed to bring them down. In fact, for this year, we expect inflation to average about 2.3% for the whole year and for next year, about 2.6%. That is within the target of two to four percent,” he added.
In an earlier interview, Diokno said inflation – the rate of increase in the prices of goods and services – is the “least” of the BSP’s worries.
Diokno said the BSP has cut interest rates by 175 basis points as it strives to boost consumer consumption and to support the pandemic-hit economy. He said investors should take advantage of the record-low interest rates to start businesses.
“If you are a consumer, if you have a project, do it now. This is the lowest interest rate I can remember in the history of the Philippines… If you are an investor or businessman and you have a business idea, fund it now, go to the banks and borrow money,” the central bank chief said.
“We wanted to encourage consumption, encourage production, encourage investment. We need to open up the economy. For as long as we are afraid to consume, to buy, or if we are afraid to invest, if we are afraid to produce, nothing will happen to our economy,” he added.
Diokno said the economic downturn in the second quarter would be “deeper” as the extension of the lockdown further dampened domestic demand and lowered production activities.
“The downturn is partly by design and driven by necessity. We wanted to prevent the virus from spreading too fast and thereby overwhelming our healthcare system and so we have to implement containment and mobility restrictions measures to flatten the curve; in other words we prioritized saving lives,” he said.