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. The inflation targets have been set at 4 ± 1 Percentage Point for 2013-2014 and at 3 ± 1 Percentage Point for 2015-2016. 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.
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.