The Inflation Target

The Development Budget and Coordination Committee (DBCC), an inter-agency economic planning body together with the BSP sets the annual inflation targets. 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 inflation targets have been set at 3.5 percent with a tolerance interval of + 1.0 percentage point for 2009 and 4.5 percent with a tolerance interval of + 1.0 percentage point for 2010. The BSP makes the announcement of the inflation target two years in advance. The inflation target for 2009 was announced in December 2007 while the inflation target for 2010 was announced in December 2008.

Inflation targeting is an approach to monetary policy that involves the use of a publicly announced inflation target set by the Government, which the BSP commits to achieve over a two-year horizon. Promoting price stability is the BSP's main priority, and the target serves as a guide for the public's expectations about future inflation, allowing them to plan ahead with greater certainty.

Inflation target for 2010 is set at 4.5 + 1.0 percentage point.