In line with the inflation targeting approach to the conduct of monetary policy, the Development Budget Coordination Committee (DBCC) through its Resolution No. 2015 – 7 dated 29 December 2015, decided to maintain the current inflation target at 3.0 percent ± 1.0 percentage point for 2016 – 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 3.0 percent ± 1.0 percentage point fixed annual target for 2016 – 2018 set by the Government remains suitable to the Philippine economy and is consistent with the country’s evolving price dynamics and sustained economic growth objectives. The current low inflation environment could be sustained over the medium term as underlying structural inflation dynamics are favorable with the improved ability of the domestic economy to accommodate supply shocks. In particular, compared to pre-inflation targeting period, headline inflation has been observed to return faster to the target while the influence of the foreign exchange rate has diminished. Structural reforms in the economy could generate further productivity gains and raise the economy’s growth potential, allowing the economy to grow at a respectable rate while maintaining prices stable. Greater transparency in the conduct of monetary policy also enabled the firmer anchoring of inflation expectations to the inflation target.
The medium-term inflation target is set by the DBCC in coordination with the BSP under the inflation targeting framework. The announcement of the target is in line with the BSP’s commitment to greater transparency and accountability in the conduct of monetary policy. Going forward, the BSP will continue to ensure that the monetary policy stance remains appropriate, consistent with its primary mandate of safeguarding price stability conducive to a balanced and sustainable economic growth.