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Government Keeps Inflation Target at 3 + 1 Percentage Point for 2015 - 2016 and Approves Inflation Target of 3 + 1 Percentage Point for 2017 - 2018

02.03.2015

In line with the inflation targeting approach to the conduct of monetary policy, the Development Budget Coordination Committee (DBCC) through its Resolution No. 2015 – 1 dated 27 January 2015, decided to keep the current inflation target at 3.0 percent ± 1.0 percentage point for 2015 – 2016 and approved the inflation target of 3.0 percent ± 1.0 percentage point for 2017 – 2018. 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 multi-year target presents a long-term view on inflation and fosters greater predictability which helps economic decision-making by businesses, households, and other economic agents. The announcement of the target is in line with the BSP’s commitment to greater transparency and accountability in its conduct of monetary policy.

The current 3.0 percent ± 1.0 percentage point fixed annual target for 2015 – 2016 set by the Government remains well attuned to the dynamics of the Philippine economy. In particular, this target is consistent with the country’s economic growth objective of 7.0 – 8.0 percent for both years.

The approved medium-term inflation target of 3.0 percent ± 1.0 percentage point for 2017 – 2018 is based on the recent assessment of current and prospective inflation trends which indicates a manageable outlook over the medium term. Structural changes in inflation dynamics and improvements in the economy’s productive capacity support a low inflation environment that is consistent with the economy’s growth trajectory. Inflation has been within target in the last six years and is expected to remain so over the medium term. Moreover, the BSP’s credible commitment to price stability has kept inflation expectations well anchored to the target. Going forward, the BSP will continue to monitor price developments to ensure that the monetary stance remains appropriate in keeping inflation within target, thus safeguarding price stability.

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