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Monetary Policy

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 BSP makes the announcement of the inflation target two years in advance. On 9 July 2010, the BSP announced a shift to a fixed inflation target for the medium term, beginning with a target of 4.0 percent ± 1.0 percentage point for 2012-2014. The inflation targets have been set at 3 ± 1 percentage point for 2017-2018 and at 3 ± 1 percentage point for 2019-2020.

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.