MANILA — The Philippine central bank said on Monday it may consider a stronger monetary policy response if elevated inflation expectations become entrenched, vowing it “will take all necessary action” to ensure that inflation returns to its 3% target.
“If the data and our assessment of evolving risks point to higher inflation expectations becoming entrenched, then we may consider a stronger response,” the Bangko Sentral ng Pilipinas said in an emailed response to a Reuters query.
The BSP raised its key policy rate by 25 basis points to 4.50% in April.
Here are more details and context of the central bank’s responses:
- The BSP said it does not target a specific exchange rate level and intervenes only when excessive volatility poses a serious risk to inflation expectations. The peso has risen 6.1% vs. the dollar in the last three months, according to LSEG data.
- The Philippines is sensitive to oil price shocks due to its high dependence on oil imports and current account deficits, but a weaker peso cushions the impact by supporting exports, remittances and revenues from business process outsourcing, the BSP said.
- BSP Governor Eli Remolona said in May the central bank was considering an off-cycle rate hike ahead of a scheduled meeting on June 18.
- Annual inflation hit 7.2% in April, the highest in three years and well above the 2%-4% comfort range of the Philippine central bank.
READ: BSP estimates May inflation in range of 7.1% to 7.9%
—Reporting by Mikhail Flores; Editing by John Mair
