In line with the BSP’s inflation targeting framework in the conduct of monetary policy, the Development Budget and Coordination Committee (DBCC), the Government’s inter-agency economic planning body, under DBCC Resolution No. 2007-04 dated 14 December 2007, approved the inflation target for 2009 of 3.5 percent, plus or minus 1 percentage point. The 2009 inflation target is lower than the 2008 target of 4 percent, plus or minus 1 percentage point.
The announcement of the inflation target set by the Government forms part of the inflation targeting framework, under which the BSP commits to achieve the inflation target over a two-year policy horizon. Promoting price stability is the BSP’s main priority, and the target guides the public’s expectations about future inflation, allowing them to formulate their investment and consumption plans as well as other spending and saving decisions with greater certainty.
The benign inflation environment is expected to continue over the policy horizon until 2009, supported by manageable liquidity growth, the firm peso, moderating risks pertaining to agricultural output, moderate wage adjustments, and well-anchored inflation expectations. In addition, demand pressures are expected to be consistent with the growing economy given that higher public and private investments are now onstream and are seen to improve the productive capacity of the economy going forward.